2022 (5) TMI 756 - 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 - Applicability of IBC on Government Companies - HELD THAT - It is found that the corporate debtor is a Government Company wholly owned by the State Government formed for serving public service and all the directors are also appointed by the State Government from the concerned departments. It is also noted that the Corporation is engaged in the development of Handloom Handicraft in the State of Gujarat and implements various schemes and projects of the State Government, assisting different crafts and craftsmen/artisans. It is evident that Corporate Debtor is engaged with the public cause and the money involved in all these activities of the public exchequer. On the facts of the case, it is clear that the applicant has rendered services to the respondent. However, apparently there was no agreement regarding the payment, including the quantum of payment, to the applicant by the respondent. The letter dated 11.01.2018 by the applicant to the respondent mentions charges as commission/brokerage but qualifies it by the statement, to be discussed and mutually agreed . No evidence regarding discussion or mutual agreement has been furnished - From the facts on record, it is clear that there was a pre-existing dispute regarding the quantum of commission payable. In absence of any written agreement, it is difficult to ascertain what was the correct commission payable. The respondent had, even during the hearing, expressed its willingness to pay the brokerage as approved by the State government. From the facts of this case, it is apparent that the genuine and bonafide dispute existed between the parties. The instant application is not maintainable - application dismissed.

Issues Involved:
1. Whether the debt claimed by the applicant qualifies as "operational debt" under the Insolvency and Bankruptcy Code (IBC), 2016.
2. Whether the respondent, a government-owned company, can be considered a "corporate debtor" under the IBC.
3. Whether there was a pre-existing dispute regarding the quantum of commission/brokerage fees payable to the applicant.
4. Whether the application filed under Section 9 of the IBC is maintainable.

Issue-wise Detailed Analysis:

1. Whether the debt claimed by the applicant qualifies as "operational debt" under the Insolvency and Bankruptcy Code (IBC), 2016:

The applicant, a registered real estate agent, claimed an amount of Rs. 23,70,030/- as commission/brokerage fees for services rendered to the respondent. The respondent argued that the outstanding amount could not be termed as "operational debt" as there was no express acceptance of such amount by the corporate debtor, nor was there an express agreement or contract under which it was agreed to perform the obligation. The Tribunal found that the applicant had indeed rendered services to the respondent, but there was no written agreement regarding the payment, including the quantum of payment, to the applicant by the respondent.

2. Whether the respondent, a government-owned company, can be considered a "corporate debtor" under the IBC:

The respondent, a government-owned company, argued that the provisions of the IBC do not apply to it as it is a government-owned entity required to act as per the instructions of the government. The Tribunal noted that the respondent is a government company wholly owned by the State Government, engaged in the development of Handloom & Handicraft in the State of Gujarat, and implements various schemes and projects of the State Government. The Tribunal referred to the judgment of the Hon'ble Supreme Court in the case of Hindustan Construction Company Limited vs Union of India, which expressed that the IBC applies to government companies unless they are performing sovereign functions. The Tribunal, however, restrained from expressing any opinion on this issue as it is pending before the Hon'ble Supreme Court.

3. Whether there was a pre-existing dispute regarding the quantum of commission/brokerage fees payable to the applicant:

The applicant issued a letter on 11 January 2018, listing the terms of commission/brokerage fees, which was qualified by the statement, "to be discussed and mutually agreed." The respondent argued that the applicant had orally agreed to accept the charges for his services as approved by the state government. On 29 August 2018, the respondent informed the applicant that the government had approved his brokerage at Rs. 4,75,000/- plus GST and requested the applicant to send a bill for the said amount. The applicant did not provide the bill in pursuance of the said letter, and no payment was made. The Tribunal found that there was a pre-existing dispute regarding the quantum of commission payable, as there was no written agreement to ascertain the correct commission payable.

4. Whether the application filed under Section 9 of the IBC is maintainable:

The Tribunal observed that the facts of the case indicated a genuine and bona fide dispute between the parties regarding the quantum of commission payable. The respondent had expressed its willingness to pay the brokerage as approved by the State government. Given the pre-existing dispute and the absence of a written agreement, the Tribunal concluded that the application under Section 9 of the IBC was not maintainable. Consequently, the application was dismissed and disposed of.

Conclusion:

The Tribunal dismissed the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, on the grounds of a pre-existing dispute regarding the quantum of commission payable and the absence of a written agreement. The Tribunal also noted the pending issue before the Hon'ble Supreme Court regarding the applicability of the IBC to government companies performing sovereign functions.

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