2021 (3) TMI 939 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - service of demand notice - time limitation - existence of debt and dispute or not. Notice mandated under Section 8 of the IBC, 2016 was served or not? - HELD THAT - The Respondent had got issued a Legal Notice dated 20.08.2018 prior to the issuance of the Demand Notice in September 2018, addressed to the Corporate Debtor at the Registered Address. The same has not been denied by the Corporate Debtor. Additionally, a notarized Affidavit of service has been filed with respect to handing over a copy of the Petition to the Office of the Corporate Debtor - Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 and Sections 8 9 of the IBC, the letter issued by the Department of Posts, Government of India alongwith the fact that admittedly the Registered Office of the Corporate Debtor in the Master Data, Ministry of Corporate Affairs is 604, Kaushal Point, 4th Floor, Behind Uday Cinema, Ghatkopar (W), Mumbai - 400086 and the same is further reflected in the Annual Report, it is concluded that service of Demand Notice mandated under Section 8 of the IBC to the aforesaid address of the Corporate Debtor is satisfactory and is therefore held sufficient. Whether Application arises out of time barred claims ? - HELD THAT - The amount became due and payable on 22.09.2016 when only a part payment was made. Section 3(11) defines debt as a liability or Application in respect of a claim which is due from any person and includes Financial Debt and Operational Debt. Section 3(12) defines default as non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the Debtor or the Corporate Debtor as the case may be. In the instant case part or instalment of the amount of debt has become due and payable as on 22.09.2016. It being a running account, considering the manner in which such businesses are conducted and accounts are kept, it would be material to see when the parties concerned treat the debt to be in default . It is pertinent to mention that the date of default mentioned in Form V of the Application is 22.09.2016 and the Application was filed in October, 2018 - the Application was filed well within the period of limitation. Whether there is a Pre-Existing Dispute prior to the filing of the Application under Section 9 of the IBC? - HELD THAT - The contention of the Learned Counsel for the Appellant regarding false and fabricated invoices is unsustainable having regard to the fact that the invoices on record bear the stamp of the Corporate Debtor by way of an acknowledgement - going by the test of the existence of dispute it is clear that the Appellant has not raised any plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. There are no illegality or infirmity in the Impugned Order passed by the Ld. Adjudicating Authority - appeal dismissed.

Summary

Issues Involved:
1. Service of Demand Notice under Section 8 of the IBC.
2. Claims being time-barred.
3. Existence of a Pre-Existing Dispute.

Issue-wise Detailed Analysis:

1. Service of Demand Notice under Section 8 of the IBC:
The Appellant argued that the notice mandated under Section 8 of the IBC was never served upon them. The Adjudicating Authority addressed this issue by examining the statutory provisions under Sections 8 & 9 of the IBC and Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. It was established that the Demand Notice was sent to the Corporate Debtor by registered post to the registered address as per the records of the Ministry of Corporate Affairs (MCA). The Department of Posts confirmed the delivery of the notice, and the acknowledgement card bore the stamp of a Chartered Accountant firm, which the Appellant claimed had no connection with the Corporate Debtor. However, the Authority held that as long as the notice was properly addressed and served at the registered address, it was sufficient under Rule 5. The receipt of the notice by an Independent Director further supported the proper service of the notice.

2. Claims being time-barred:
The Appellant contended that the claims were time-barred as the invoices dated back to 2014, with default dates in January 2015, and the application was filed in October 2018. The Authority referred to the Hon’ble Supreme Court judgments in ‘Babulal Vardharji Gurjar’ and other cases, which clarified that the IBC was not intended to revive time-barred claims. The Authority examined the ledger and running account, which showed that the last payment was made on 22.09.2016. The date of default was considered to be 22.09.2016, making the application filed in October 2018 within the limitation period. The Authority concluded that the application was filed within the period of limitation.

3. Existence of a Pre-Existing Dispute:
The Appellant argued that there was a pre-existing dispute due to business transactions with related companies and alleged that the invoices were forged and fabricated. The Authority noted that the Appellant failed to provide substantial evidence of any pre-existing dispute prior to the filing of the Section 9 application. The Authority referred to the Supreme Court judgment in ‘Mobilox Innovations Private Limited’ v/s. ‘Kirusa Software Private Limited’, which established that the existence of a dispute must be a plausible contention requiring further investigation and not a feeble argument unsupported by evidence. The Authority found that the Appellant’s claims of false and fabricated invoices were unsustainable as the invoices bore the stamp of the Corporate Debtor. The Authority concluded that there was no pre-existing dispute.

Conclusion:
The Authority found no illegality or infirmity in the Impugned Order passed by the Adjudicating Authority. The service of the Demand Notice was held to be sufficient, the claims were within the limitation period, and there was no pre-existing dispute. Consequently, the appeal was dismissed with no order as to cost.