2020 (2) TMI 1126 - AT - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - application rejected on the ground that there is the existence of dispute regarding the outstanding amount claimed by the Applicant - HELD THAT - The Appellant/the operational creditor has not filed any document about the letter of engagement, assignment to the operational creditor to act for and on their behalf in liaisoning with Bank for raising loan. There is no document on record to substantiate the claim of operational creditor/Appellant to pay service charge, as claimed by the Appellant, i.e. 1% service charge on the total sanctioned term loan amount - The document submitted by the Appellants requires further investigation to prove its claim, which can't be done in summary proceedings. The Documents relied on are not sufficient to show engagement for service charge fixed, and the rate of service charge. There is nothing on record to show that the amount is due and payable. Thus, the Adjudicating Authority has rightly rejected the application filed u/s 9 of the 'I B' Code - Appeal dismissed.

Summary

Issues:
- Appeal against rejection of petition under Section 9 of the Insolvency & Bankruptcy Code, 2016.
- Dispute over outstanding amount claimed by the Applicant.
- Existence of engagement agreement for service charges.
- Failure to provide evidence of services rendered by the Operational Creditor.
- Allegation of undue haste in deciding the application by the Adjudicating Authority.
- Interpretation of section 70 of the Contract Act regarding gratuitous acts.
- Lack of documentation supporting the claim of service charge by the Appellant.
- Communication between the parties regarding the loan sanctioning proposal.

Analysis:
The judgment pertains to an appeal against the rejection of a petition under Section 9 of the Insolvency & Bankruptcy Code, 2016. The Appellant, an Operational Creditor, claimed that they facilitated a loan of ?25 crores for the Corporate Debtor and invoiced for service charges amounting to ?29.50 lacs, which remained unpaid. The Adjudicating Authority rejected the application citing a dispute over the outstanding amount and the absence of an engagement agreement for service charges. The Appellant argued that services were rendered, and the invoices were not disputed by the Corporate Debtor.

The Adjudicating Authority's decision was challenged on the grounds of not appreciating the evidence of services rendered and passing the order hastily without proper document review. The Appellant contended that as per industry standards, a service provider is entitled to 2% of the sanctioned loan amount, emphasizing the non-gratuitous nature of the services provided. However, the lack of documentation supporting the claim of service charge and engagement agreement worked against the Appellant's case.

The Appellant presented email and WhatsApp communications as evidence of discussions with the Corporate Debtor regarding the loan sanctioning proposal. Despite this, the Tribunal found the documents insufficient to establish a clear engagement for service charges and the rate thereof. The Tribunal concluded that there was a lack of evidence to prove the amount was due and payable, leading to the dismissal of the appeal. The judgment highlights the importance of documenting engagements and service agreements in financial transactions to avoid disputes and ensure clarity in legal proceedings.