2022 (6) TMI 1181 - 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 - invoices forged by the Applicant to extort money - invoices not authenticate - HELD THAT - The Applicant has alleged a default on part of the Respondent in payment of a sum of Rs. Rs. 9,46,177/-. The Respondent has, in reply to the Demand Notice dated 16.05.2019 in Form 3 under Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, issued by the Petitioner/Applicant, raised dispute in relation to amount due and the invoices raised. The Respondent has even disputed the invoices raised by the Petitioner/Applicant by stating that certain invoices raised by the Petitioner/Applicant are deliberately and malafidely forged. In terms of this judgment of the Supreme Court in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited 2017 (9) TMI 1270 - SUPREME COURT , it is clear that to qualify as pre-existing dispute, the dispute has to be raised before the issuance of notice u/s. 8, IBC Code, 2016. The Corporate Debtor must bring to the notice of the Operational Creditor the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute. The Respondent, in reply to the notice u/s. 8, had stated that the amount due as per his ledger was Rs. 210/- which was supported by his books of accounts. The Respondent has failed to produce any prior communication before the issuance of notice u/s. 8 of IBC Code, 2016 so as to establish that the dispute was pre-existing. Thus, this Tribunal is of the view that no pre-existing dispute exists between the parties. The Respondent has alleged that invoices have been forged by the Applicant to extort money from the Respondent. Both the Respondent and the Applicant have attached their ledgers which do not match and the Respondent has claimed that invoices have been forged by the Applicant - As per the ledger maintained by the Respondent, a mere amount of Rs. 210 is due to the Applicant. The amount of debt due, if any, cannot be ascertained as long as the authenticity of invoices is proved. The dispute with respect to forgery of invoices cannot be decided by this Adjudicating Authority. This Adjudicating Authority is not expected to ascertain the veracity of invoices raised. Therefore, the Applicant may explore other legal remedies. In the present case, the authenticity of the invoices is itself in doubt, the debt cannot be established at this stage and therefore, proceedings under Section 9 of the IBC Code, 2016 cannot be initiated against the Respondent - application dismissed.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Alleged default in payment by the Corporate Debtor.
3. Dispute over the existence and authenticity of invoices.
4. Allegation of misuse of IBC proceedings for debt recovery.
5. Pre-existing dispute and its relevance under IBC.
6. Verification of debt and authenticity of invoices.

Issue-wise Detailed Analysis:

1. Initiation of CIRP under Section 9 of IBC, 2016:
The application was filed by the Operational Creditor seeking to initiate CIRP against the Corporate Debtor for an alleged default in clearing a debt of Rs. 5,69,986 and interest of Rs. 3,76,191, totaling Rs. 9,46,177. The Operational Creditor supplied PVC pipes and other materials to the Corporate Debtor, who partially paid for these supplies, leaving an outstanding amount.

2. Alleged Default in Payment by Corporate Debtor:
The Operational Creditor claimed that despite regular supplies and timely invoicing, the Corporate Debtor made only partial payments and failed to clear the outstanding amount. The last payment was made on 04.07.2017, and subsequent requests for payment were acknowledged but not fulfilled by the Corporate Debtor.

3. Dispute Over the Existence and Authenticity of Invoices:
The Corporate Debtor disputed the invoices, claiming they were forged and that the debt was non-existent. They argued that no agreement for interest on delayed payments existed and that the amount due was only Rs. 210. The Operational Creditor countered this by alleging that the Corporate Debtor had fabricated their ledger accounts to mislead the tribunal and that the invoices were genuine and acknowledged by the Corporate Debtor.

4. Allegation of Misuse of IBC Proceedings for Debt Recovery:
The Corporate Debtor argued that the application under IBC was an attempt to arm-twist them into paying a non-existent debt, suggesting that the Operational Creditor should have opted for a summary suit under the Code of Civil Procedure, 1908, if they were confident about the debt. They emphasized that IBC proceedings are meant for insolvency resolution, not debt recovery.

5. Pre-existing Dispute and Its Relevance Under IBC:
The tribunal referred to the Supreme Court's judgment in "Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited," which clarified that for a dispute to qualify as pre-existing, it must be raised before the issuance of notice under Section 8 of IBC. The Corporate Debtor failed to produce any prior communication establishing a pre-existing dispute before the notice was issued, leading the tribunal to conclude that no pre-existing dispute existed.

6. Verification of Debt and Authenticity of Invoices:
The tribunal noted that both parties presented conflicting ledger accounts and that the authenticity of the invoices was in question. The Corporate Debtor did not issue a balance confirmation certificate or acknowledge the debt claimed by the Operational Creditor. Given the disputed authenticity of the invoices, the tribunal stated that it could not ascertain the debt's validity and suggested that the Operational Creditor explore other legal remedies.

Conclusion:
The tribunal dismissed the application for initiating CIRP under Section 9 of IBC, 2016, due to the unresolved dispute over the authenticity of the invoices and the inability to establish the debt conclusively. The tribunal emphasized that it is not the appropriate forum to determine the veracity of the invoices and advised the Operational Creditor to seek other legal avenues.