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2020 (10) TMI 64 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - This Adjudicating Authority is satisfied that, (a) The Corporate Debtor has availed the loan/credit facility from the Petitioner for payment to the Employer - Sardar Sarovar Narmada nigam Ltd, the amounts towards issuance of bank guarantee and creation of fixed deposit receipt (FDR) in favour of the Employer for the execution of the works under the Case Tender. (b) Existence of debt above Rs. One Lac; (c) Debt is due; (d) Default has occurred on 10.10.2017 (e) Petition had been filed on 06.06.2018 which is within the limitation period; (f) Copy of the Application filed before the Tribunal has been sent to the Corporate Debtor and the application filed by the Petitioner Under Section 7 of IBC is found to be complete for the purpose of initiation of Corporate Insolvency Resolution Process against the Corporate-Debtor-Company. Hence, the present IB Petition is admitted - the date of admission of this petition is 03.06.2020.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016. 2. Existence and nature of debt. 3. Default and limitation period. 4. Pre-existing disputes and their impact on the maintainability of the petition. Issue-wise Detailed Analysis: 1. Initiation of CIRP under Section 7 of IBC, 2016: The Financial Creditor, Mass Infrastructure Private Limited, filed an Insolvency and Bankruptcy Petition under Section 7 of the IBC, 2016, seeking the initiation of CIRP against the Corporate Debtor, Kunal Structure (India) Private Limited, for the default in repayment of deposits including interest, totaling ?2,15,31,062 as of 10.10.2017. The Financial Creditor claimed that the Corporate Debtor had failed to repay the deposits made for the issuance of bank guarantees and creation of fixed deposit receipts (FDR) necessary for the execution of certain construction projects. 2. Existence and Nature of Debt: The Corporate Debtor had availed loans/credit facilities from the Financial Creditor for the issuance of bank guarantees and creation of FDRs in favor of the Employer for executing the works under the tender. The Financial Creditor placed deposits amounting to ?4,24,51,300 with the Corporate Debtor, which were shown as liabilities in the Corporate Debtor's balance sheet. The Corporate Debtor was obligated to return these deposits along with interest upon completion of the work, as per the terms of the sub-contract dated 17.09.2012. 3. Default and Limitation Period: The Financial Creditor issued a demand notice on 10.10.2017, marking the date of default. The petition was filed on 06.06.2018, within the limitation period. The Adjudicating Authority observed that the Corporate Debtor had acknowledged the debt and default, and the petition was complete for initiating CIRP under Section 7 of the IBC. 4. Pre-existing Disputes and Their Impact on Maintainability: The Corporate Debtor argued that the deposits were forfeited due to the Financial Creditor's failure to complete the work as per the contract. However, the Financial Creditor contended that no such issue was raised earlier, and the work was completed as per the contract terms. The Adjudicating Authority noted that the existence of disputes regarding the quality and performance of work does not affect the initiation of CIRP under Section 7, as the loan transaction was independent of the operational disputes. Separate Judgments: One member of the Tribunal, however, differed on the issue of maintainability under Section 7. The dissenting opinion suggested that the petitioner should be considered an Operational Creditor, as the amount claimed arose from a sub-contract agreement, and thus should be filed under Section 9 of the IBC. Additionally, the dissenting member opined that the petition was time-barred under Article 137 of the Limitation Act, as the cause of action arose on 31.05.2015, the date of the work completion certificate, and not from the date of the demand notice in 2017. The dissent also highlighted pre-existing disputes regarding the quality of work and pending litigation, which would render the petition under Section 9 non-maintainable due to the existence of disputes. Conclusion: The majority decision admitted the petition under Section 7, appointed an Interim Resolution Professional, and declared a moratorium as per Sections 13 and 14 of the IBC. The dissenting opinion suggested that the petition should be rejected due to the nature of the debt, limitation issues, and pre-existing disputes.
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