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2021 (5) TMI 271 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - application has been filed on 29.05.2018 whereas period of supplies and invoices is 28.08.2015 to 31.03.2016. However in the Form No. 5 it is mentioned that debt fell due between May 2015 to March 2016 though two invoices are of the date of 28.08.2015 - typographical error - pre-existing dispute or not - Service of demand notice - principles of parity - HELD THAT - It is an admitted fact that this application has been filed by the Resolution Professional and subsequently pursued by liquidator of the Corporate Debtor and this has been done with the approval of the CoC. The amount claimed in this application is more than the threshold limit of 1 lakh. The debt is due and payable both in law as well as in fact because the same is neither barred by limitation nor premature. Notice under Section 8 of IBC 2016 has also been delivered to the Corporate Debtor. As regard to plea of Corporate Debtor that reply to such notice of demand had been given there are proofs of dispatch of such reply to notice which are not at all readable and clear hence it does not establish the fact of delivery of such reply. Thus claim of the Corporate Debtor is liable to be rejected that it had replied to the notice of demand under 8 of IBC 2016. Accordingly we hold that no reply to Demand Notice has been given by the Corporate Debtor within the statutory period of 10 days from the receipt of such notice and no reasonable cause has been shown even during the course of hearing for not doing so. Hence in our opinion this application is liable to be admitted for this reason alone on the principle of parity i.e. whom delivery of notice under Section 8 of IBC 2016 is mandatory for the Operational Creditor to make an application under Section 9 maintainable similar obligation is on the Corporate Debtor to avoid itself being admitted into CIRP to give reply to such notice of demand within 10 days. Pre-existing dispute or not - HELD THAT - No material has brought on record by the Corporate Debtor as regard to what work was done by Operational Creditor till termination and what work remained to be completed. As per claims of Operational Creditor outstanding invoice pertain to work already done by the Operational Creditor only. Further in the reply to notice of demand assuming that it was given slow rate of completion of project as alleged in letters of 15.03.2016 and 01.04.2016 has not been mentioned but issue of variation in rates applied in the invoice has only been mentioned hence such reply of Corporate Debtor contradicts nature of its claim as regard to pre-existing dispute. Thus for this reason also this claim of Corporate Debtor is rejected - The Corporate Debtor has failed to make out a triable case. However considering the general importance of this issues as this please is taken almost in all case where aspect of pre-existing dispute is involved and even in above discussion it has been held that Adjudicating Authority has briefed jurisdiction and proceedings before Adjudicating Authority are of summary nature. This situation has prompted us to look into legal mechanism which has been in operation for resolution of commercial disputes before IBC 2016 was enacted. It is pertinent to mention that the tribunalisation or creation of institutions of Adjudication Authority is a modern practice which is evolved firstly for the purpose of expeditious disposal of the matters of social importance and in particular of matters of the nature of the commercial disputes having economic significance for the parties in dispute as well as for the society and the National Economy as a whole and secondly to deliver justice with the help of technical experts along with legal experts. For these reasons also there are no substance in the claims made by the Corporate Debtor. The application is otherwise complete and defect free - The application deserves to be admitted - application admitted - moratorium declared.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP). 2. Pre-existing disputes and their impact on the application. 3. Jurisdiction and powers of the Adjudicating Authority (NCLT). 4. Nature of proceedings before the Adjudicating Authority. 5. Summary nature of proceedings and the requirement for a full trial. 6. Legal claims and defenses raised by the Corporate Debtor. Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP): The application was filed under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016 by the Resolution Professional cum Liquidator of Steel Konnectss (India) Pvt. Ltd., an Operational Creditor, against M/s. MBC Agro Industries LLP, the Corporate Debtor, for an outstanding sum of ?31,41,90,779/-. The application was deemed timely and complete, with the debt being due and payable both in law and in fact. The Corporate Debtor did not reply to the Demand Notice within the statutory period of 10 days, leading to the conclusion that the application was maintainable and deserved to be admitted. 2. Pre-existing Disputes and Their Impact on the Application: The Corporate Debtor claimed pre-existing disputes regarding the slow rate of progress and variations in the actual work completed. However, the Adjudicating Authority found that these claims were not substantiated with credible evidence. The letters allegedly delivered by hand over a distance of 250 kms were deemed suspicious and likely fabricated to avoid liability. The Authority emphasized that disputes must be genuine and not spurious, hypothetical, or illusory. The Corporate Debtor's claims were found to be contradictory and lacking merit, leading to the rejection of the pre-existing dispute defense. 3. Jurisdiction and Powers of the Adjudicating Authority (NCLT): The Adjudicating Authority (NCLT) has exclusive jurisdiction to deal with applications under the IBC, 2016. The NCLT is vested with powers similar to those of a Civil Court for specific matters and aspects, ensuring that it can examine all aspects of an application filed under Section 9 of the IBC. The Authority operates on principles of natural justice and is equipped to handle commercial disputes effectively. The claim that the NCLT lacks jurisdiction or that its proceedings are of a limited nature was rejected. 4. Nature of Proceedings Before the Adjudicating Authority: The proceedings before the NCLT are not strictly of a summary nature. While the IBC aims for expeditious resolution, the NCLT has the authority to conduct a detailed examination of facts and evidence when necessary. The Authority's role includes ensuring that disputes are not frivolous or vexatious and that the rights of all parties are protected. The NCLT's procedure is modeled on the Code of Civil Procedure, 1908, ensuring a fair and thorough adjudication process. 5. Summary Nature of Proceedings and the Requirement for a Full Trial: The Corporate Debtor argued that the application involved complex issues requiring a full trial. However, the Adjudicating Authority found that the claims made by the Corporate Debtor were not substantial enough to warrant a regular trial. The NCLT has the power to decide commercial disputes in a timely manner, and the mechanism under the IBC provides ample opportunity for the Corporate Debtor to respond and settle disputes before the initiation of CIRP. The claim for a full trial was rejected, emphasizing that the NCLT's proceedings are designed to be efficient yet thorough. 6. Legal Claims and Defenses Raised by the Corporate Debtor: The Corporate Debtor's defenses included claims of pre-existing disputes, suppression of material facts, and the need for a full trial. These defenses were meticulously examined and found to be without merit. The Adjudicating Authority highlighted that the defenses were either contradictory or unsupported by credible evidence. The claim that the application was an abuse of process was also rejected, as the application met all statutory requirements and was filed in accordance with the provisions of the IBC, 2016. Conclusion: The application filed by the Operational Creditor was admitted, and the Corporate Debtor was placed under Corporate Insolvency Resolution Process (CIRP). The moratorium under Section 14 of the IBC was declared, and an Interim Resolution Professional (IRP) was appointed to manage the process. The NCLT's order emphasized the importance of adhering to statutory timelines and ensuring that disputes are genuine and substantiated by evidence. The application was found to be complete, defect-free, and deserving of admission, leading to the initiation of CIRP against the Corporate Debtor.
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