2020 (3) TMI 415 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - The Hon'ble Supreme Court has held that existence of undisputed debt is sine qua non of initiating Corporate Insolvency Resolution Process (CIRP) in TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED VERSUS EQUIPMENT CONDUCTORS AND CABLES LIMITED 2018 (10) TMI 1337 - SUPREME COURT where it was held that once the operational creditor has filed an application, which is otherwise complete, the Adjudicating Authority must reject the application under Section 9 (5) (2) (d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. Petition dismissed.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process under Section 9 of Insolvency and Bankruptcy Code, 2016; Existence of operational debt exceeding a specified amount; Dispute between parties regarding the debt.

Analysis:
The judgment by the National Company Law Tribunal, Cuttack involved an application filed by M/s IFGL Refractories Ltd. under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiating the Corporate Insolvency Resolution Process of M/s Agrawal Structure Mills (P) Ltd. The respondent, a private company limited by shares, raised pre-existing disputes against the invoices submitted by the Operational Creditor. The jurisdiction of the Adjudicating Authority was established as the Registered Office of the Corporate Debtor was located in Raipur, Chhattisgarh.

The Operational Creditor claimed a total amount due of ?373,315, including the principal debt and interest. However, the Corporate Debtor disputed each invoice, indicating the existence of disputes between the parties. The Tribunal referred to the Supreme Court's ruling in Transmission Corporation of Andhra Pradesh Ltd. v. Equipment Conductors & Cables Ltd., emphasizing the conditions to be met for initiating the Corporate Insolvency Resolution Process. The Court highlighted the need for an undisputed debt exceeding a specified amount, documentary evidence of the debt being due and payable, and the absence of a dispute or pending legal proceedings related to the debt.

Based on the above legal principles, the Tribunal dismissed the application, stating that if there is a notice of dispute or a record of dispute, the application must be rejected. The Tribunal clarified that the Adjudicating Authority should assess whether a plausible contention exists requiring further investigation and that the dispute is not frivolous. The judgment concluded by dismissing the application but allowing the petitioner to seek other remedies under different laws to recover their dues, if any. The Registry was directed to communicate the order to the parties, and a certified copy of the order was to be issued upon compliance with formalities.