2022 (2) TMI 464 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - It is the stand of the Appellant that the impugned order was passed by the Adjudicating Authority , resting on presumption and assumption and there was no proper appreciation of Documents on Record - HELD THAT - Under Section 9 of the Code, an Adjudicating Authority is required to examine before admitting or rejecting an application under Section 9 of the Code whether the dispute raised by the Corporate Debtor qualify as a dispute , in terms of Section 5 (6) of the Code and whether Notice of Dispute given by the Corporate Debtor satisfies the conditions prescribed in Section 8(2) of the Code. The Adjudicating Authority is to scrutinise the attendant circumstances to the issue of Demand Notice with a view to decide whether a bona fide dispute exists between the parties. The dispute must be one which necessitates more investigation and at this juncture, the Adjudicating Authority will not examine the merits of the dispute . If the dispute is not an imaginary one or a hypothetical one and if the dispute really exists, the application is liable to be rejected, as opined by this Tribunal. If there is plausible contention raised on behalf of the concerned party, which requires a further investigation, then the application cannot be admitted. The dispute in whatever form, ought to have been raised before the Demand Notice under section 8 of the Code was served on the Corporate Debtor . The I B Code, 2016 is not a Debt Enforcement Procedure . The application of an operational creditor is not maintainable, if the Corporate Debtor has a dispute about its outstanding/debt. The dispute is to be seen by the Adjudicating Authority as one based on tenable substantial grounds. In this connection, it is relevantly pointed out that if there is a dispute about the debt, then, it is for the applicant to approach the competent Civil Court to decide the triable issues. In short, the Adjudicating Authority/Appellate Tribunal is not to be utilised as a Debt Collecting Agent . The Appellant/Operational Creditor/Applicant is not in a position to establish that the Debt due free from any Dispute . The Adjudicating Authority cannot admit the application filed by the Appellant/Applicant (under Section 9 of the Code), based on assumptions and presumptions. In short, in the instant case the Dispute raised by the Respondent/Corporate Debtor is not a mere denial but the same is projected on a tangible ground - this Tribunal holds that the Adjudicating Authority came to the right conclusion that the Debt claimed by the Appellant/Operational Creditor cannot be decided in a summary jurisdiction under the I B Code, 2016 and opined that it would be appropriate for the parties to relegate to civil proceedings or to arbitration if the same was contemplated and dismissed the CP 328/IB/2018 which requires no interference in the hands of this Tribunal in Appeal . Appeal dismissed.

Summary

Issues Involved:
1. Reconciliation of Accounts
2. Existence of Debt and Default
3. Validity of Documents and Evidence
4. Admissibility of the Application under Section 9 of IBC, 2016
5. Dispute over Quality of Goods
6. Contractual Interest Rate

Issue-wise Detailed Analysis:

1. Reconciliation of Accounts:
The Adjudicating Authority noted that there was a significant discrepancy between the amounts claimed by the Operational Creditor and the Corporate Debtor. The Operational Creditor claimed an outstanding sum of ?53,52,607.73, while the Corporate Debtor's records indicated only ?60,169 was due. Despite multiple opportunities given to reconcile the accounts from 05.12.2018 to 09.03.2020, the parties failed to resolve the differences. The Tribunal emphasized that the exact amount due could only be ascertained upon reconciliation of accounts.

2. Existence of Debt and Default:
The Tribunal observed that the debt and default on the part of the Corporate Debtor could not be ascertained from the documents provided by the Operational Creditor. The invoices in question dated back to 2012, and there was a vast difference in the amounts claimed by both parties. The Tribunal concluded that without reconciliation, it could not determine whether the debt claimed by the Operational Creditor met the threshold limit prescribed under Section 4 of the IBC, 2016.

3. Validity of Documents and Evidence:
The Appellant contended that the Adjudicating Authority erroneously relied on forged and fabricated documents submitted by the Corporate Debtor. The Corporate Debtor, however, disputed the authenticity of an email dated 29.10.2015, which the Operational Creditor cited as an acknowledgment of debt. The Tribunal found that the email did not explicitly state that the amount was due and payable by the Corporate Debtor.

4. Admissibility of the Application under Section 9 of IBC, 2016:
The Tribunal reiterated that the IBC is not a debt enforcement procedure and that an application under Section 9 is not maintainable if there is a dispute over the debt. The Adjudicating Authority must examine whether the dispute raised qualifies as a bona fide dispute under Section 5(6) of the Code. In this case, the Tribunal found that the dispute raised by the Corporate Debtor was genuine and substantial, necessitating further investigation.

5. Dispute over Quality of Goods:
The Corporate Debtor claimed that the materials supplied by the Operational Creditor were of sub-standard quality, causing significant losses. The Tribunal noted that this dispute over the quality of goods was a genuine issue that needed to be resolved in a civil court or through arbitration, not under the summary jurisdiction of the IBC.

6. Contractual Interest Rate:
The Operational Creditor claimed interest at a contractual rate of 30% per annum, which the Corporate Debtor denied agreeing to. The Tribunal noted that the Corporate Debtor had not admitted to this rate of interest and had consistently disputed the claim. The absence of a signed contract agreeing to this rate further weakened the Operational Creditor's position.

Conclusion:
The Tribunal upheld the Adjudicating Authority's decision to dismiss the application under Section 9 of the IBC, 2016. The Tribunal found that the debt claimed by the Operational Creditor could not be determined without reconciling the accounts and that the dispute raised by the Corporate Debtor was substantial and genuine. The Tribunal advised the parties to seek resolution through civil proceedings or arbitration. Consequently, the appeal was dismissed without costs.