2022 (3) TMI 1060 - 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 - time limitation - HELD THAT - It appears that four invoices totalling 11,987.45 were raised by the Operational Creditor for legal services rendered to the Corporate Debtor. Three invoices dated 05.01.2015, 13.07.2015, 06.10.2015 are beyond the period of limitation of three years but the invoice raised on 31.03.2016 of 1382 (equivalent to ₹ 11,03,745.75) is within the limitation. Though, no reply was given by the Corporate Debtor on Demand notice dated 16.11.2018, issued by the Operational Creditor, but the Corporate Debtor has already raised the dispute in respect of the quality of services provided by the Operational Creditor through an e-mail reply in response to the email of Sterling wherein the Corporate Debtor had undertaken to pay the outstanding amount, if remaining work is completed by the Operational Creditor. It is also noted that affidavit regarding no dispute is not on record, and also the proof of delivery is not on record. The proof of delivery is required under Section 8 of the IBC, 2016 - there is a pre-existing dispute in respect to the services provided by the Operational Creditor - This application is rejected and disposed of.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016; Dispute regarding outstanding payment for legal services; Pre-existing dispute and lack of proof of delivery of demand notice.

Initiation of Corporate Insolvency Resolution Process:
The petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the authorized signatory of a company to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor for defaulting on a payment of £11,987.45 along with interest. The Operational Creditor had provided legal services to the Corporate Debtor as per an agreement and raised invoices, which were acknowledged by the Corporate Debtor without dispute. Despite reminders and a demand notice, the outstanding amount was not paid by the Corporate Debtor.

Dispute Regarding Outstanding Payment for Legal Services:
The Corporate Debtor denied the Operational Creditor's claims, alleging a pre-existing dispute regarding the quality of services provided. The Corporate Debtor claimed that the Operational Creditor did not update properly on the litigations and failed to respond adequately to communications. Additionally, the Corporate Debtor highlighted a previous communication with a third party indicating dissatisfaction with the Operational Creditor's performance.

Pre-existing Dispute and Lack of Proof of Delivery of Demand Notice:
The Tribunal observed that while some invoices were beyond the limitation period, one invoice was within the limitation. The Corporate Debtor had raised a dispute regarding the quality of services through previous communications. The Tribunal noted the absence of an affidavit regarding no dispute and the lack of proof of delivery of the demand notice, as required under the IBC, 2016. Consequently, the Tribunal rejected the petition on the grounds of a pre-existing dispute and the absence of proof of delivery of the demand notice.

Conclusion:
The Tribunal rejected the application for initiating the Corporate Insolvency Resolution Process due to the presence of a pre-existing dispute regarding the services provided by the Operational Creditor and the lack of proof of delivery of the demand notice. The judgment emphasized the importance of compliance with procedural requirements under the Insolvency and Bankruptcy Code, 2016 and the need for clarity in establishing disputes before initiating insolvency proceedings.