2022 (7) TMI 662 - AT - 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 - In Section 9 Application of the I B Code, 2016, the Adjudicating Authority is to examine whether a Notice of Dispute was received by the Operational Creditor or whether there is a record of Dispute in Information Utility. An Existence of an undisputed Debt, is a sine quanon for initiating the Corporate Insolvency Resolution Process - An Adjudicating Authority has to adhere the mandate of Section 9 of the I B Code, 2016, and in particular the mandate of Section 9 (5) of the Code and to admit or to reject the Application, as opined by this Tribunal, after all, the Adjudicating Authority is not required to be satisfied as to whether the Defense is likely to succeed or not. The merits of dispute are not the concern at this stage, but only an Adjudicating Authority is to satisfy at this stage, about the Existence of Dispute, which is good enough to invalidate the Section 9 Application - It is to be remembered that the Dispute and/or the Suit or Arbitration Proceedings, must be pre-existing, it must exist before receipt of Demand Notice or Invoice. As long as the Dispute is not a spurious or an illusory or hypothetical one, the Adjudicating Authority is to admit the Section 9 Application filed by the Petitioner/Applicant/Operational Creditor. As far as the present case is concerned that it is latently and patently quite clear that the two Account Statements of the 2nd Respondent/Corporate Debtor and M/s. Vaishnavi Impex were properly kept separately and in the light of foregoing detailed discussions and also this Tribunal considering the fact that the prior to and after issuance of Demand Notice dated 16.03.2020 by the 1st Respondent/Operational Creditor to the 2nd Respondent/Corporate Debtor, the 2nd Respondent/Corporate Debtor had not raised any Dispute in regard to the Goods supplied by the Operational Creditor and in fact, the 2 nd Respondent/Corporate Debtor had admitted the Debt through emails, the 2nd Respondent/Corporate Debtor having utilised the Goods supplied by the 1st Respondent/Operational Creditor cannot avoid or evade its responsibility in not making the payment of Debt of Rs.3,60,11,075/-, because it had committed Default and therefore, without any hesitation, this Tribunal holds that the Adjudicating Authority, (National Company Law Tribunal, Amaravati Bench), had rightly admitted the CP(IB) No./60/9/AMR/2020, which does not suffer from any material irregularity or patent illegality in the eye of law. Appeal dismissed.

Summary

Issues Involved:
1. Whether the Operational Creditor could prove that the Corporate Debtor has failed to discharge the debt due to the Operational Creditor and whether CIRP can be initiated against the Corporate Debtor.

Detailed Analysis:

Issue 1: Failure to Discharge Debt and Initiation of CIRP

Background:
The Appellant, a Suspended Director of the Corporate Debtor, filed an appeal against the order of the Adjudicating Authority (NCLT), which admitted the petition for initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.

Adjudicating Authority's Observations:
The NCLT observed that the Corporate Debtor had admitted to making purchases covered by 284 invoices from the Operational Creditor. The account statements indicated a closing balance of Rs. 2,38,88,424.50 as due from the Corporate Debtor to the Operational Creditor. Despite the demand notice, the Corporate Debtor failed to discharge the debt, leading to the initiation of CIRP.

Appellant's Submissions:
The Appellant argued that the Corporate Debtor had made substantial payments amounting to Rs. 8,64,28,304 to the Operational Creditor and that errors in accounting had occurred due to the clubbing of purchases made by M/s. Vaishnavi Impex and the Corporate Debtor. The Appellant contended that the Operational Creditor had received excess payments and that the debt was erroneously acknowledged by an unauthorized signatory of M/s. Vaishnavi Impex.

Operational Creditor's Contentions:
The Operational Creditor maintained that the Corporate Debtor had defaulted on payments for the invoices raised and that the debt was acknowledged by the Corporate Debtor in their ledger statements and emails. The Operational Creditor also asserted that the Corporate Debtor had reaped benefits from the invoices by availing Input Tax Credit.

Evaluation by the Tribunal:
The Tribunal noted that the Corporate Debtor did not issue any reply to the demand notice and that the debt was acknowledged through emails and ledger statements. The Tribunal emphasized that an acknowledgment of debt must be unqualified and relate to a definite liability. The Tribunal also highlighted that the Adjudicating Authority is not required to analyze the dispute in detail but must evaluate whether the dispute is plausible.

Conclusion:
The Tribunal concluded that the Corporate Debtor had admitted the debt and defaulted in making payments. The Tribunal upheld the NCLT's decision to admit the CIRP petition, stating that the decision did not suffer from any material irregularity or patent illegality.

Disposition:
The appeal was dismissed, and the connected application seeking a stay of the impugned order was closed.

Summary:
The judgment revolves around the failure of the Corporate Debtor to discharge its debt to the Operational Creditor, leading to the initiation of CIRP. The Tribunal upheld the NCLT's decision, emphasizing the acknowledgment of debt by the Corporate Debtor and the absence of any material irregularity in the NCLT's order. The appeal was dismissed, affirming the initiation of CIRP against the Corporate Debtor.