2021 (7) TMI 940 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - HELD THAT - It is not in dispute that the demand notice was sent through speed post to the address of the respondent-corporate debtor as mentioned in its master data and when the same was offered to deliver at the said address and when the same was unclaimed, it should be treated as a valid and proper delivery of the demand notice, as per the settled principles of law. Hence, this issue is decided in favour of the petitioner. Whether the petitioner has proved the existence of an enforceable debt and the liability to pay the same by the corporate debtor? - HELD THAT - It is not in dispute that the respondent-corporate debtor vide Annexure 5 warning notice has raised serious allegations of breach of the contract, malpractice, defective and substandard supply of machinery and threatened to revoke/cancel the contract between the parties. The petitioner failed to show the settlement of those disputes either before issuance of the demand notice or thereafter. In the absence of the same, it is to be concluded that there is a pre-existing dispute between the parties and that the CP is liable to be dismissed on this ground - there is no necessity to go into other allegations and counter allegations made in the CP. Petition dismissed.

Summary

Issues involved:
1. Validity of statutory demand notice service on the respondent-corporate debtor.
2. Proof of existence of an enforceable debt and liability to pay by the corporate debtor.

Issue 1: Validity of statutory demand notice service:
The petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Process against the Corporate Debtor. The Corporate Debtor, a company incorporated under the Companies Act, 1956, was alleged to have failed to make payments due to the Operational Creditor for equipment supplied. The Operational Creditor claimed an amount of ?134.72 lakhs, including interest, as unpaid operational debt. The Corporate Debtor contended that the demand notice was not validly served, as evidenced by tracking reports, and challenged the alleged hand delivery. However, the Tribunal held that sending the demand notice through speed post to the registered address, even if unclaimed, constituted valid delivery as per legal principles, ruling in favor of the petitioner on this issue.

Issue 2: Proof of an enforceable debt and liability to pay:
The next issue revolved around whether the petitioner had proved the existence of an enforceable debt and the liability of the Corporate Debtor to pay. While the Corporate Debtor acknowledged the transactions, it highlighted a pre-existing dispute evidenced by warning and legal notices. The petitioner argued that the warning notice was responded to, negating the existence of a dispute. The Tribunal noted serious allegations in the warning notice, indicating breach of contract and substandard supplies. As the disputes were not settled before or after the demand notice, the Tribunal concluded that a pre-existing dispute existed, leading to the dismissal of the Corporate Petition. Consequently, the Tribunal found no merit in the petition and dismissed it.

In conclusion, the Tribunal addressed the issues of the validity of the statutory demand notice service and the proof of an enforceable debt and liability to pay by the Corporate Debtor. The judgment highlighted the importance of resolving disputes before initiating insolvency proceedings and emphasized the need for clear evidence of debt and liability. The dismissal of the petition underscored the significance of addressing disputes promptly to avoid unnecessary legal actions.