2021 (12) TMI 433 - 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 - HELD THAT - It is a bonafide claim of the Corporate Debtor that the Input Tax Credit paid must be assessed undisputedly. The Corporate Debtor had, in its letter received by the Operational Creditor on 22.07.2019, has admitted the debt and was ready to pay the due amount on providing the Bank guarantee till the assessment. Though the letter in respect to the dispute of ITC was received by the operational creditor after 10 days after the i.e. statutory period of reply to the demand notice as per section 8 of IB Code, the dispute seems to real and genuine. It is the bonafide right of the Corporate Debtor that the amount paid for GST must be assessed without any complication. The objection of the Operational Creditor in respect that no such agreement was made by and between the Operational Creditor and Corporate Debtor for giving the Bank guarantee for GST dispute is not well founded. Such a situation arose after Rathank Retails Private Limited was declared as a fictitious company. Such situation was not in picture since the inception of the business relations with the Operational Creditor. The apprehension of the Corporate Debtor is genuine, as if the transactions of the Operational Creditor prove to be non-genuine, the Corporate Debtor would have bear to the additional GST along with interest and penalty - pre-existing dispute under section 8 (2) (a) of Ib Code fully established. The petition of the Operational Creditor for initiation of CIRP under section 9 of IB Code is rejected. Petition dismissed.

Summary

Issues Involved:
- Application under Section 9 of the Insolvency & Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process (CIRP) against a Corporate Debtor for default amount.
- Claim of Operational Creditor for non-payment of invoices against the Corporate Debtor.
- Allegation of pre-existing dispute by the Corporate Debtor regarding the authenticity of transactions and GST issues.
- Response of Corporate Debtor claiming a pre-existing dispute and readiness to pay the due amount with conditions.
- Evaluation of evidence and arguments by the Tribunal to determine the existence of a pre-existing dispute under Section 8(2)(a) of the IB Code.

Analysis:

1. The Operational Creditor filed an application under Section 9 of the IBC seeking initiation of CIRP against the Corporate Debtor for defaulting on payment of invoices totaling ?26,89,290. The Operational Creditor provided details of the transactions and non-payment by the Corporate Debtor.

2. The Operational Creditor contended that all goods were supplied to the Corporate Debtor, invoices were raised with valid GST, and a demand notice was issued after non-payment. The Corporate Debtor allegedly raised debit notes without valid grounds to show a pre-existing dispute.

3. The Corporate Debtor argued a pre-existing dispute based on an alert circular regarding a fictitious company supplying goods. The Corporate Debtor expressed willingness to pay the due amount if the Operational Creditor provided a bank guarantee to cover GST issues until assessment.

4. The Tribunal analyzed the submissions and evidence. It noted the amount due, the alert circular about the fictitious supplier, and the Corporate Debtor's willingness to pay with conditions. The Tribunal found the dispute genuine, considering the potential GST implications and lack of agreement for a bank guarantee.

5. The Operational Creditor denied the pre-existing dispute claim, stating all consignments were from genuine suppliers, and GST returns were regularly filed without dispute. The Tribunal observed the lack of evidence supporting the Operational Creditor's claims regarding original suppliers' invoices.

6. Ultimately, the Tribunal dismissed the Operational Creditor's petition for CIRP initiation under Section 9 of the IB Code. It concluded that a pre-existing dispute under Section 8(2)(a) was established, based on the Corporate Debtor's concerns about the authenticity of transactions and potential GST liabilities.

7. The judgment, delivered by the National Company Law Tribunal, Ahmedabad Bench, dismissed the application and provided a detailed analysis of the issues raised by both parties, emphasizing the importance of establishing a genuine pre-existing dispute under the Insolvency & Bankruptcy Code.