2020 (6) TMI 662 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - A combined reading of Sections 8 and 9 of the 'I B Code' leaves no room for doubt that the payment of unpaid operational debt has to be unqualified and evidenced by electronic transfer from Bank account of the 'Corporate Debtor' to the Bank account of the 'Operational Creditor' and that the 'Operational Creditor' can initiate 'Corporate Insolvency Resolution Process' only if he does not receive payment from the 'Corporate Debtor' - Admittedly, in the instant case, even the payment of the admitted part of the claim amounting to ₹ 27,08,891/- has not been received by the 'Operational Creditor'. Default being in excess of Rupees One Lac would warrant initiation of 'Corporate Insolvency Resolution Process' at the instance of 'Operational Creditor'. There is no legal infirmity in the impugned order of admission passed by the Adjudicating Authority - appeal dismissed.

Summary

Issues:
Admission of Company Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 based on pre-existing dispute regarding invoices for medical supplies.

Analysis:
1. The appellants, members of the suspended Board of Directors and shareholders of the Corporate Debtor, challenged the order admitting the Company Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016. The dispute centered around invoices for medical supplies where the Operational Creditor claimed non-payment despite partial acknowledgment by the Corporate Debtor.

2. The Operational Creditor provided para-medical staff and medical supplies to the Corporate Debtor since June 2017. Invoices were raised for the supplies, with the Corporate Debtor making partial payments but failing to clear the outstanding amount. The Operational Creditor issued Demand Notices after cheques were dishonored, claiming a significant sum as due. The Corporate Debtor disputed some invoices but admitted liability for a lesser amount, leading to the initiation of insolvency proceedings.

3. The appellants argued that disputed invoices were not acknowledged by the Corporate Debtor, and there was no proof of delivery for some products. They contended that the demand for the alleged debt was raised only in the second Demand Notice and that the Corporate Debtor was unaware of the disputed invoices until then. The Corporate Debtor claimed no default as an admitted amount was tendered, and cheques were prepared for collection.

4. On the contrary, the Operational Creditor asserted that the Corporate Debtor acknowledged the debt before the Demand Notice, referencing emails and issued cheques. The withdrawal of the first Demand Notice was attributed to errors, with the second Notice reiterating the claim. The Operational Creditor maintained that the Corporate Debtor admitted liability for a portion of the debt, justifying insolvency proceedings.

5. The Tribunal examined the evidence and arguments presented by both parties. It acknowledged the undisputed supply of medical goods and the operational debt due from the Corporate Debtor. The Corporate Debtor's delayed dispute of some invoices and dishonored cheques indicated a financial strain, leading to the Operational Creditor seeking insolvency resolution.

6. The Tribunal found that the Corporate Debtor's offer of partial payment with conditions did not absolve it of liability, as the Code required unqualified payment of debts. The Corporate Debtor's failure to make the admitted payment to the Operational Creditor justified the initiation of insolvency proceedings, as per the Code's provisions.

7. Considering the legal framework and the parties' actions, the Tribunal upheld the Adjudicating Authority's decision to admit the Company Petition. The appeal was dismissed for lack of merit, with no costs awarded.