2020 (4) TMI 700 - 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 - 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 . The Adjudicating Authority does not have the powers of the Civil Court to arrive at the exact amount due and payable under various invoices. Further, what is the terms and conditions of the contract between the parties and the documents substantiating the same, ought to be decided only by trial by the Civil Court. Hence, this Adjudicating Authority cannot go into these details in a summary suit. Application dismissed.

Summary

Issues:
- Application under section 9 of Insolvency & Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process of M/s. Fortune Spirit Ltd.
- Dispute regarding the pricing between the Operational Creditor and the Corporate Debtor since 2015.
- Determination of the existence of an operational debt exceeding a certain amount.
- Examination of documentary evidence to establish the debt's due and payable status.
- Assessment of the existence of a dispute between the parties or record of pending suits or arbitration proceedings.

Analysis:

The judgment by the National Company Law Tribunal, Cuttack, involved an application under section 9 of the Insolvency & Bankruptcy Code, 2016 for initiating the Corporate Insolvency Resolution Process of M/s. Fortune Spirit Ltd. The applicant, M/s. Print and Craft, represented by Sandip Banerjee, sought the recovery of a due amount from the Corporate Debtor, alleging non-payment of &8377; 40,18,482.06 with interest. The respondent, M/s. Fortune Spirit Ltd., refuted the claim, asserting that all dues were settled following a dispute over pricing since 2015.

The Tribunal examined the submissions, documents, and arguments presented by both parties. It highlighted the importance of establishing the existence of an undisputed debt as a prerequisite for initiating the Corporate Insolvency Resolution Process, citing the Supreme Court's ruling in Transmission Corporation of Andhra Pradesh Ltd. v. Equipment Conductors Cables Ltd. The Court emphasized the need to determine the presence of an operational debt exceeding a specified threshold, the due and payable status supported by documentary evidence, and the existence of a genuine dispute between the parties.

Furthermore, the Tribunal clarified that it lacked the authority to delve into the specifics of the amount due and the contractual terms between the parties, as those matters fell within the purview of a Civil Court trial. Consequently, the Tribunal dismissed the application, stating that it should be rejected due to the unresolved dispute and the absence of an undisputed debt. The judgment allowed the applicant to explore alternative legal remedies for recovering any legitimate dues, emphasizing that the dismissal did not preclude other avenues for seeking redress.

In conclusion, the Tribunal's decision underscored the significance of establishing an undisputed debt and genuine dispute resolution procedures in insolvency cases. It delineated the boundaries of the Tribunal's jurisdiction in assessing financial claims and contractual disputes, reaffirming the need for thorough investigation and adherence to legal procedures in resolving such matters.