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2021 (10) TMI 816 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - deduction of TDS also made - HELD THAT - It is evident from the conduct of the Corporate Debtor that twenty (20) cheques of ₹ 5,00,000/- (Rupees Five Lakh only) each were given to the Operational Creditor by the Corporate Debtor. Ten (10) cheques were cleared by the Corporate Debtor. Two (2) cheques were dishonoured and Eight (8) cheques were returned by the Operational Creditor to the Corporate Debtor in good faith that the payment will be made by the Corporate Debtor to the Operational Creditor through RTGS - Further deducting TDS on all the invoices raised by the Operational Creditor on Corporate Debtor including unpaid invoices proves that the debt is due and payable by the Corporate Debtor to the Operational Creditor. As per provisions of the Income Tax Act, TDS is to be deducted on payment to the payee or crediting the amount, whichever is earlier. Here, TDS has been deducted on all invoices including unpaid invoices. Pre-existing dispute or not - HELD THAT - In the present case, the existence of pre-existing dispute by the Corporate Debtor is not tenable as there is no correspondence on record where any dispute with respect to quantity or quality was raised by the Corporate Debtor on receipt of even a single unpaid invoice by the Corporate Debtor. The Corporate Debtor has not raised any occurrence of pre-existing dispute even in the reply of Demand Notice dated 12.06.2021. The Corporate Debtor has admitted the existence of debt and default through various confirmation letters sent by the Operational Creditor and countersigned by the Corporate Debtor. In view of the above correspondences, the debt and default in this case is established and the above company petition is liable to be admitted - Application admitted - moratorium declared.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) 2. Existence of Debt and Default 3. Pre-existing Dispute 4. Reconciliation of Accounts 5. Validity of Invoices and Cheques 6. Compliance with Insolvency and Bankruptcy Code (IBC) Issue-wise Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP): The Petitioner sought to initiate CIRP against the Corporate Debtor under Sections 8 and 9 of the IBC, alleging failure to make an outstanding payment of ?1,98,47,220/- along with interest. 2. Existence of Debt and Default: The Petitioner provided advertising services to the Corporate Debtor, raising 30 invoices totaling ?4,74,55,683/-, with part payments made and TDS deducted. The Corporate Debtor issued 20 post-dated cheques, of which 10 were honored, 2 dishonored, and 8 returned. The Tribunal found that the deduction of TDS on all invoices, including unpaid ones, indicated the debt was due and payable. The Corporate Debtor’s issuance and partial honoring of cheques further affirmed the existence of debt and default. 3. Pre-existing Dispute: The Corporate Debtor argued a pre-existing dispute over the reconciliation and verification of accounts, claiming payments were on a "payable when able" basis. However, the Tribunal found no evidence of disputes over quality or quantity of services in the correspondence before the Demand Notice. The Tribunal referenced the Supreme Court's definition of "pre-existing dispute" in Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd., concluding that the Corporate Debtor’s claims were invalid and did not constitute a pre-existing dispute. 4. Reconciliation of Accounts: The Corporate Debtor’s request for reconciliation was deemed a lame excuse by the Tribunal, especially since the Corporate Debtor had issued cheques and deducted TDS. The Tribunal noted that the term "Payable when able" indicated the Corporate Debtor’s inability to discharge its payment obligations, not a genuine dispute over reconciliation. 5. Validity of Invoices and Cheques: The Corporate Debtor contended that invoices were received for verification and were vague. The Tribunal rejected this, stating the acknowledgment of invoices and partial payments constituted liability. The return of post-dated cheques was seen as an act of good faith by the Petitioner, not negating the debt. 6. Compliance with Insolvency and Bankruptcy Code (IBC): The Tribunal found the Petitioner complied with IBC provisions, issuing the Demand Notice and substantiating claims with documentary evidence. The Corporate Debtor’s defenses were not legally sustainable. Judgment: The Tribunal admitted the Petition, ordering the initiation of CIRP against the Corporate Debtor. An Interim Resolution Professional (IRP) was appointed, and the Petitioner was directed to deposit ?5,00,000/- towards initial CIRP costs. The Tribunal imposed a moratorium prohibiting suits, asset transfers, and other actions against the Corporate Debtor, ensuring the supply of essential goods and services continued during the moratorium period. The management of the Corporate Debtor was vested in the IRP, and the Tribunal directed the Registry to update the Corporate Debtor’s Master Data and communicate the order to all parties involved.
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