2022 (4) TMI 1256 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dies - Operational Creditors - existence of debt and dispute or not - HELD THAT - The observations and conclusion which has been drawn by the Adjudicating Authority are based on the sequence of the events and facts of the case. The Adjudicating Authority has returned the finding that there was not a single correspondence between the Operational Creditor and the Corporate Debtor qua raising and demanding of bill amount or supply of material. No order of supply of material and demand for payment prior to filing of the Application are the reasons which have been relied and the Adjudicating Authority has come to the conclusion that the bill raised is forged and fabricated and has been raised only for initiation of CIRP of the Corporate Debtor who is the builder - it is also noticed that bill as relied by the Appellant does not contain any GST number which reaffirms the view that bill was a bogus bill prepared only for filing the Section 9 Application. The submission of the Counsel for the Appellant is agreed upon that the quantum of the amount may not be relevant for taking a decision either to reject or admit the Application but on the sequence of the events and the facts which were before the Adjudicating Authority, the Adjudicating Authority rightly came to the conclusion that there was active collusion between the parties to defraud the other creditors and to facilitate the Respondent to enjoy the rigors of the I B Code. There are no reason to take a different view from one which have been taken by the Adjudicating Authority - appeal dismissed.

Summary

Issues:
- Appeal against rejection of Section 9 Application under the Insolvency and Bankruptcy Code, 2016.
- Allegation of collusion between Operational Creditor and Corporate Debtor.
- Finding of Adjudicating Authority regarding forged and fabricated bill.
- Reliance on a previous judgment in a similar case.

Analysis:
1. The judgment deals with an appeal filed against the rejection of a Section 9 Application under the Insolvency and Bankruptcy Code, 2016. The Appellant, claiming to be an Operational Creditor, sought recovery of an outstanding amount of ?1,86,900. The Adjudicating Authority rejected the Application based on the lack of evidence regarding an agreement between the parties for the supply of building material.

2. The Adjudicating Authority found that there was no correspondence or demand for payment prior to the filing of the Application, indicating a lack of genuine transaction between the parties. The Authority concluded that the bill submitted by the Appellant was forged and fabricated, suggesting collusion between the parties to misuse the I&B Code. The absence of a GST number on the bill further supported the Authority's view.

3. The Appellant argued against the finding of collusion, emphasizing the small amount in question as insufficient grounds for such a conclusion. However, the Tribunal upheld the Adjudicating Authority's decision, stating that the quantum of the amount was not determinative, but the sequence of events and facts supported the conclusion of collusion to defraud other creditors.

4. The Appellant also cited a previous judgment in a similar case to support their argument. However, the Tribunal differentiated the present case based on its unique facts and affirmed the Adjudicating Authority's decision. The Tribunal emphasized the need for concrete evidence to establish collusion, which was found to be present in the current case.

5. Ultimately, the Tribunal dismissed the Appeal, agreeing with the Adjudicating Authority's findings and concluding that there was no merit in the Appeal. The judgment underscores the importance of substantiating claims with evidence and highlights the consequences of collusive practices in insolvency proceedings.