2020 (9) TMI 438 - 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 - It is not in dispute that the corporate debtor received a sum of 6, 11, 10, 000/- on 04.10.2018. The case of the operational creditor that this amount was given for supply of 6300 gift cards at 10, 000/- per card. Whereas the case of the corporate debtor is that there was a balance to the tune of 31 crores to be paid by the operational creditor and that this money was given by the operational creditor towards part-payment for the outstanding balance and the same was also informed to the operational creditor by the corporate debtor through e-mail dated 07.10.2018. It is the case of the operational creditor that no amount was due to the corporate debtor. On the other hand the corporate debtor was contending that an amount of 31 crores was due from the operational creditor. When there was a prior dispute between the parties a petition under section 9 of the I B Code cannot be admitted. Business transactions worth several hundreds of crores of rupees took place between the operational creditor and the corporate debtor. Therefore the dispute raised by the corporate debtor cannot be said to be spurious hypothetical or illusory. The next contention of the corporate debtor in the alternative is that the amount given as advance does not fall under the definition of operational debt. The case of the operational creditor is that money was given as an advance for supply of gift cards. It is true that advance if any given does not come under the definition of operational debt. The case of the corporate debtor is that money was given for supply of gift cards after uploading the cards at 10, 000/-per card. The money is given for uploading gift cards. Therefore it cannot be said in the strict sense that it was an advance. We are unable to understand that money to be treated as advance of money. Money is intended for uploading cards and only after uploading cards delivery is to be effected. So in the strict sense money given is not an advance in the nature of transaction carried between the operational creditor and the corporate debtor. However there was prior dispute and as such the petition cannot be admitted. Petition dismissed.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Alleged default by the corporate debtor in supplying gift cards.
3. Pre-existing disputes between the operational creditor and the corporate debtor.
4. Allegations of fabricated and forged invoices.
5. Legal notices and complaints filed by both parties.
6. Determination of whether the amount paid constitutes an operational debt.
7. Claims of fraud and suppression of facts by both parties.
8. Legal precedents and their applicability to the case.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of CIRP for an amount of ?10,28,69,811/-, later amended to ?6,11,10,000/- by the operational creditor.

2. Alleged default by the corporate debtor in supplying gift cards:
The operational creditor claimed that the corporate debtor failed to supply gift cards worth ?6,11,10,000/-. The corporate debtor admitted receiving the amount but contended it was adjusted against an outstanding balance allegedly owed by the operational creditor.

3. Pre-existing disputes between the operational creditor and the corporate debtor:
The corporate debtor argued that there was a pre-existing dispute regarding the outstanding balance, which was raised prior to the Demand Notice. The operational creditor denied owing any amount and claimed the dispute was spurious and unsupported by documents.

4. Allegations of fabricated and forged invoices:
The corporate debtor alleged that the operational creditor, in connivance with former employees, had fabricated invoices to claim higher discounts, resulting in financial losses for the corporate debtor. The operational creditor denied these allegations and maintained that the invoices were genuine.

5. Legal notices and complaints filed by both parties:
The operational creditor issued legal notices and filed a complaint with the Economic Offences Wing (EOW) of Delhi Police. The corporate debtor responded with a counter-complaint and an FIR to frustrate the claims of the operational creditor.

6. Determination of whether the amount paid constitutes an operational debt:
The operational creditor argued that the amount paid was for the provision of goods and services, thus constituting an operational debt. The corporate debtor contended that the amount was an advance and did not qualify as an operational debt.

7. Claims of fraud and suppression of facts by both parties:
Both parties accused each other of fraud and suppression of vital facts. The corporate debtor claimed that the operational creditor had not disclosed essential communications and had fabricated documents. The operational creditor countered that the corporate debtor had misled the Tribunal with false claims and documents.

8. Legal precedents and their applicability to the case:
The corporate debtor relied on several legal precedents, including the Mobilox Innovations Private Limited vs. Kirusa Software Private Limited case, to argue that the existence of a pre-existing dispute should lead to the rejection of the petition. The operational creditor cited cases to support the claim that the advance given constituted an operational debt.

Conclusion:
The Tribunal found that there was a pre-existing dispute between the parties, which was not spurious, hypothetical, or illusory. The petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, was dismissed as the dispute was genuine and raised prior to the Demand Notice. The Tribunal also noted discrepancies in the invoices and the existence of multiple legal proceedings between the parties.

← Previous Next →