2022 (4) TMI 572 - AT - 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 - privity of contract between Operational Creditor and Corporate Debtor - whether the Adjudicating Authority was justified in admitting the Application filed by the Operational Creditor under Section 9 of the Code? - HELD THAT - The material on record evidences that the Corporate Debtor deposited TDS of ₹ 4,12,000/- which is the TDS on the entire amount of the Invoice of ₹ 2,06,00,000/-. It is not disputed that the Operational Creditor deposited the GST of ₹ 37,08,000/- on the entire amount of the Invoice in favour of the Corporate Debtor and the benefit of the said amount as input amount has been taken by the Corporate Debtor . A perusal of the Invoices evidences that the Tax Invoice was raised in favour of the Corporate Debtor and not on M/s. Cox Kings. It is significant to mention that the part payment was also made by the Corporate Debtor and not by M/s. Cox Kings. This Tribunal is of the considered view that the privity of contract is between the Operational Creditor and the Corporate Debtor and therefore the amount which is in default is due and payable . In so far as Pre-Existence of Dispute warranting rejection of Application of triggering of CIRP under Section 9 of the Code is concerned, a bare perusal of the material on record filed by the Corporate Debtor does not evidence any dispute which is not spurious or illusory and requires investigation. There is no hesitation in holding that the Appellant has hired the services of the Respondent for executing the event and owes an obligation to pay for the same, thereby bringing it within the fold of Operational Debt and therefore the first Respondent holds the status of an Operational Creditor qua the Appellant - there is no infirmity in the Order of the Adjudicating Authority in holding that there is an Operational Debt in respect of the default which is alleged and is therefore payable in law. The finding is perfectly justified in the facts and circumstances of the case - appeal dismissed.

Summary

Issues:
Admission of Section 9 Application by Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016.

Analysis:
The appeal was filed by the Suspended Director of a company, the Corporate Debtor, against the Impugned Order passed by the Adjudicating Authority admitting the Section 9 Application filed by an Operational Creditor. The facts revealed that the Corporate Debtor was engaged by another company, which was in liquidation, to provide services for an event. The Corporate Debtor acted as an intermediary and was paid a fixed charge. The Operational Creditor, a service provider to the engaging company, filed a claim with the Insolvency Resolution Professional. The main issue was whether the Adjudicating Authority was justified in admitting the Operational Creditor's Application under Section 9 of the Code.

It was established that the Corporate Debtor acted as an intermediary and filed a claim as an Operational Creditor with the Liquidator of the engaging company. The Tax Invoice showed payments made to the Operational Creditor by the Corporate Debtor. TDS and GST were deposited accordingly. The Tribunal found that the privity of contract was between the Operational Creditor and the Corporate Debtor, making the amount due and payable. No dispute was found to warrant rejection of the Application under Section 9. The Tribunal concluded that the Operational Debt was valid, and the Operational Creditor was entitled to payment, upholding the Adjudicating Authority's Order.

The Tribunal held that the Impugned Order was justified based on the evidence and circumstances of the case. Consequently, the appeal was dismissed, with no costs imposed. The decision affirmed the existence of an Operational Debt owed by the Corporate Debtor to the Operational Creditor, as per the provisions of the Insolvency and Bankruptcy Code, 2016.