2021 (9) TMI 415 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - pre-existing dispute or not - service of demand notice - HELD THAT - The Adjudicating Authority ought not to have directed the Respondent to settle the claim of the Petitioner within a period of 3 months from the date of receipt of the copy of the Order. Further, the Learned Adjudicating Authority observed that the Application filed by the Appellant/Applicant is with an intention to recover an alleged balance amount, which is against the object of Code, and the settled position of the law. This Tribunal is of the view that the said finding is patently illegal and unreasonable. Further, the Learned Adjudicating Authority in the Impugned Order observed that the Respondent has paid part payments with an assurance to clear the balance in short time. The said observation is also illegal without application of mind. It is a settled Law that when a debt and default is proved, the Adjudicating Authority has to admit the Application and initiate Corporate Insolvency Resolution Process against the Corporate Debtor otherwise it is complete. The Learned Adjudicating Authority having noticed that there is a debt and default, passed the Impugned Order which is non-application of mind and accordingly this Tribunal is of the view that it is patently illegal and cannot with-stand to the scrutiny of law - Respondent failed to establish the existence of dispute prior to issuance of Demand Notice . This Tribunal comes to a conclusion that it is a fit case to be admitted by the Adjudicating Authority - Application admitted - moratorium declared.

Summary

Issues:
Appeal against Adjudicating Authority's order under Section 9 of IBC Code, 2016.

Analysis:
1. The appeal challenged the Adjudicating Authority's order dismissing the application under Section 9 of the IBC Code, 2016. The appellant contended that there was no pre-existing dispute regarding the claim made by the Operational Creditor, and the application was complete.
2. The brief facts involved the Appellant receiving a Purchase Order for supply and commissioning of goods, issuing invoices, receiving partial payment, and subsequently filing a Demand Notice under Section 8 of the IBC Code, 2016. The Respondent failed to respond, leading to the Application under Section 9 for Corporate Insolvency Resolution Process.
3. The Appellant served Notices on the Respondent as per the Adjudicating Authority's directions and filed an Affidavit evidencing the Service of Notice.
4. The Respondent's email indicated a threat to withdraw the case to obtain Form C, demonstrating awareness of the case and the Demand Notice.
5. The Tribunal found that the Respondent's avoidance of payment and intention to raise an unsuccessful dispute post-filing were clear. The debt was categorized as Operational Debt under the IBC Code, 2016.
6. The Adjudicating Authority's direction for the Respondent to settle the claim within three months was deemed illegal, as the debt and default were established, warranting admission of the Application and initiation of Corporate Insolvency Resolution Process.
7. The Tribunal concluded that the Adjudicating Authority's order was illegal and directed the Authority to admit the Application and initiate Corporate Insolvency Resolution Process within 15 days, setting aside the Impugned Order.

This detailed analysis outlines the key legal aspects and findings of the judgment, emphasizing the application of the IBC Code, 2016, and the Tribunal's decision to allow the appeal and direct the Adjudicating Authority to admit the Application.