2022 (7) TMI 96 - 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 - Admittedly, from the Petition itself it is seen that the date of default is 19 January2007, admittedly again; no payment has been received by the Petitioner after 19 January 2007. The demand notice is dated 09 September 2019 - The Operational Creditor claims that this act is the triggering point for the date of default. However, we do not accept this contention for the reason that nonpayment of the Commercial Tax withheld in terms of the Memorandum of Understanding as agreed between the parties cannot constitute an Operational Debt within the meaning of section 5(21) of the Code. The submissions by the Operational Creditor reflect its intention,i.e., to seek recovery of its dues under the Code. Nevertheless, the rudimentary principle behind the enactment of the Code isto help the distressed Corporate Debtor to stand back on its feet, and not to make this Adjudicating Authority wear the cap of a recovery court. Further, the vakalatnama filed by the Operational Creditor is also not proper, though this is not fatal to the petition itself. Petition dismissed.

Summary

Issues:
- Initiation of Corporate Insolvency Resolution Process under section 9 of the Insolvency and Bankruptcy Code, 2016.
- Dispute regarding non-payment by the Corporate Debtor to the Operational Creditor.
- Examination of the validity of the demand notice and the date of default.
- Interpretation of the Memorandum of Understanding between the parties.
- Determination of whether the Operational Debt is due and payable.

Analysis:
1. The Company Petition was filed under section 9 of the Insolvency and Bankruptcy Code, 2016, by the Operational Creditor seeking to initiate Corporate Insolvency Resolution Process against the Corporate Debtor for non-payment of a significant sum since January 2007.
2. The Operational Creditor provided printing services to the Corporate Debtor, and invoices were raised for services rendered, with consistent payments until January 2007 when payments ceased.
3. The Operational Creditor issued a demand notice in September 2019, claiming the due amount, which was acknowledged by the Corporate Debtor.
4. The Corporate Debtor contended that the debt was not due and payable, citing old ledger accounts and the absence of action by the Operational Creditor within the limitation period.
5. The Corporate Debtor argued that it was not insolvent and had a profitable business, disputing the Operational Debt claimed by the Operational Creditor.
6. The parties had a pre-bid alliance through Memorandums of Understanding for printing textbooks, with payments to the Operational Creditor to be made by the Corporate Debtor based on JEPC releases.
7. The Tribunal analyzed the date of default, validity of the demand notice, and the nature of the Operational Debt under the Code.
8. The Tribunal dismissed the Company Petition, emphasizing the Code's purpose to aid distressed debtors and not solely act as a recovery court, allowing the Operational Creditor to pursue other legal remedies.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the arguments presented by the parties and the Tribunal's findings in the matter.