2020 (4) TMI 643 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - pre-existing dispute - HELD THAT - It can be seen that the parties to the contract by their conduct signified their acquiescence in the continuance of the contract. There is an apparent deviation with respect to the contractual obligations regarding completion of Factory Acceptance Test from the side of both the parties which disturbs the existence per-se of the operational debt. It is an accepted principle for a claim in the nature of operational debt that it emanates from the Purchase Order and the terms and conditions contained therein, the Applicant/Operational Creditor appears to have made suppression of such a material document; no mention seem to have been made in the Application submitted by the Operational Creditor. The suppression of existence of such a Purchase Order appears to be an attempt to camouflage their contractual obligations so as to establish their claim for operational debt. In addition, the Operational Creditor has not completed the process of erection and commissioning so as to make them eligible to claim the operational debt. There is a deviation with respect to the contractual obligations regarding completion of Factory Acceptance Test from the side of both the parties which disturbs the existence per-se of the operational debt leading to a pre-existence of dispute - Petition dismissed.

Summary

Issues:
Application under section 9 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process.

Analysis:
1. The Operational Creditor filed an application under section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor seeking to initiate the Corporate Insolvency Resolution Process, declare moratorium, and appoint an Interim Resolution Professional.
2. The Application detailed the Operational Creditor and Corporate Debtor's particulars, including their CIN, authorized and paid-up capital, and registered office address.
3. The Operational Creditor claimed an operational debt of ?27,43,184/- towards the principal amount, which fell due on 01-12-2016, supported by invoices and a chronology of events.
4. Documents, records, and evidence of default were provided by the Operational Creditor, including copies of invoices, bank statements, and ledger accounts.
5. The Corporate Debtor, engaged in pharmaceutical formulations, failed to pay the outstanding dues for machinery supplied by the Operational Creditor, leading to the dispute.
6. The Corporate Debtor acknowledged the debt but cited delays and requested time for payment, leading to a demand notice from the Operational Creditor.
7. The Corporate Debtor disputed the operational debt, claiming the Petition was not maintainable and citing a Purchase Order with payment terms and delays in supply.
8. The Corporate Debtor alleged non-compliance with the Purchase Order terms by the Operational Creditor, leading to losses and a dead investment.
9. Both parties presented their perspectives on delays, payments, and contractual obligations, highlighting lapses and failures in fulfilling the Purchase Order conditions.
10. The Tribunal found deviations in contractual obligations from both parties, especially regarding the completion of the Factory Acceptance Test, leading to a pre-existing dispute.
11. Due to the existence of a dispute and failure to fulfill contractual obligations, the Tribunal dismissed the Petition, emphasizing the parties' rights to pursue remedies in the appropriate forum without costs.