2022 (5) TMI 654 - 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 noted that on behalf of the Corporate Debtor strong plea had been made that the Operational Creditor raises invoices in one entity. However, as per the understanding the payments payable to the Operational Creditor had been paid into those three entities against the supply made by one entity. In this regard a strong reliance was placed on e-mail dated 14.07.2016 received from the Operational Creditor whereby the Operational Creditor had walked out in outstanding balance payable by the Corporate Debtor at ₹ 5,82,516/- as on 13.07.2016. Further it was strongly argued on behalf of the Corporate Debtor that the payment had been made to all the three entities against the supply made by the Operational Creditor and based upon that the Corporate Debtor had paid excess of ₹ 1,05,767/-.To substantiate this claim, reliance has been placed by the Corporate Debtor on ledger accounts of the Operational Creditor maintained by the Corporate Debtor in its books of account. No proof of payment or transfer of amounts so claimed has been attached in the reply or thereafter, Thus, such claim remains unsubstantiated for want of evidence to that effect on record. The Operational Creditor has placed on record the balance sheet of the Corporate Debtor as on 31.03.2017 wherein an outstanding sum payable to the Operational Creditor to the tune of Rs. 6,536,488.00 has been shown. This fact further raises doubts on the claim made by the Corporate Debtor as no material has been brought on record to show that this outstanding amount had been arrived at without considering the payment made to all the three entities taken together - It is further noted that Corporate Debtor entered into compromise agreement dated 21.02.2017 for settling down outstanding dues which also goes to show the Corporate Debtor liable to make payment of some liability to Operational Creditor. It is seen from the records that notice of default under Section 8 has been delivered and affidavit under Section 9(3)(b) of IBC has also been filed and debt fell due on 08.09.2017 and this application has been filed on 12.10.2018 so the application is found well within the limitation - It is noted that the application filed u/s 9 is complete and complies with the requirements of the relevant provisions of IBC, 2016 read with Rules and Regulations made thereunder. The outstanding amount is more than the threshold limit of Rs. 1,00,000/-. There does not exist any dispute within the meaning of provisions of Section 8 9 of IBC, 2016. Application admitted - moratorium declared.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process under Section 9 of IBC, 2016 based on default amount and date. Dispute regarding outstanding dues between Operational Creditor and Corporate Debtor. Existence of mutual set off agreement or privity of contract between entities. Compliance with Section 8 and 9 of IBC, 2016 for initiating CIRP. Admittance of the application and appointment of IRP.

Initiation of Corporate Insolvency Resolution Process:
The Operational Creditor filed an application under Section 9 of the Insolvency & Bankruptcy Code, 2016 against the Corporate Debtor for the initiation of Corporate Insolvency Resolution Process due to a claimed default amount of Rs. 65,36,488/- as on 09.09.2016. The Operational Creditor provided evidence of unpaid invoices and a demand notice to the Corporate Debtor, who claimed the amount was already paid to related entities of the Operational Creditor. Affidavit under Section 9(3)(b) and 9(3)(c) of IBC, 2016 was also submitted.

Dispute Regarding Outstanding Dues:
The Operational Creditor argued that a compromise agreement was not fulfilled, and the management of the entities involved was distinct with no mutual set off agreement. The Corporate Debtor contended that payments were made to related entities based on instructions from the Operational Creditor's director, thus claiming an excess payment. The Operational Creditor emphasized the absence of evidence supporting the Corporate Debtor's claim and presented the Corporate Debtor's balance sheet showing the outstanding amount.

Existence of Mutual Set Off Agreement:
The Corporate Debtor asserted that payments were set off against the supply made by the Operational Creditor to related entities. However, the Tribunal found the Corporate Debtor's claim unsubstantiated due to lack of evidence. The Operational Creditor's balance sheet indicated the outstanding amount, raising doubts about the Corporate Debtor's claim. A compromise agreement further indicated the Corporate Debtor's liability towards the Operational Creditor.

Compliance with Section 8 and 9 of IBC, 2016:
The Tribunal confirmed the delivery of the default notice under Section 8 and the filing of an affidavit under Section 9(3)(b) of IBC. The debt fell due on 08.09.2017, and the application was filed within the limitation period. The application met the requirements of IBC, 2016, and the outstanding amount exceeded the threshold limit, with no existing dispute as per Sections 8 & 9.

Admittance of the Application and Appointment of IRP:
After reviewing submissions from both parties and the records, the Tribunal found the application complete and compliant with relevant provisions of IBC, 2016. Therefore, the application was admitted, declaring a moratorium, appointing an IRP, and issuing necessary directions for the Corporate Insolvency Resolution Process. The Tribunal set conditions for the admission, including the deposit by the Operational Creditor and scheduled a progress report filing for a future date.

This detailed analysis covers the issues involved in the legal judgment delivered by the National Company Law Tribunal, Allahabad Bench, regarding the initiation of Corporate Insolvency Resolution Process under Section 9 of IBC, 2016 based on a disputed default amount and date, the existence of a mutual set off agreement, compliance with relevant sections of IBC, 2016, and the subsequent admittance of the application with the appointment of an IRP.