2022 (7) TMI 1279 - 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 - quantum of operational debt - HELD THAT - The operational debt of Rs. 17,13,326/- towards the outstanding rentals (including CAM, AHU, Electricity) of Elante store claimed by the applicant cannot be considered as supply of goods or rendering of any services and thus, cannot fall within the definition of Operational Debt as envisaged under the Code, 2016. Further, whether or not the alleged amount of Rs. 17,13,326/- towards the outstanding rentals (including CAM, AHU, Electricity) of Elante store, to be reimbursed by the respondent corporate debtor would be an issue of trial between the parties. Alleged dispute in respect of the interest amount - HELD THAT - Since the principle amount due and payable towards the secondary sale is well above the minimum threshold of Rs. 1 Crore as stipulated in Section 4 of the Code, 2016, we are not inclined to indulge in the exercising of quantifying the operational debt. Pre-existing dispute - HELD THAT - In order to substantiate the plea of preexisting dispute between the parties, the respondent corporate debtor has stated contentions in its reply along with relevant documents including e-mail correspondences exchanged between the parties, ledger account for the year 2017-2019, copy of corporate debtor reply dated December 01, 2019 to the legal notice dated September 13, 2019 issued by the applicant intimating the applicant about the existence of dispute between the parties with regard to fulfillment of obligations as specified in the term sheets dated 02.09.2017, short supply of stocks, existence of outstanding debt - The Hon'ble Supreme Court in catena of Judgements has laid down the principle that pre-existing dispute which may be ground to thwart an application under Section 9 has to be real dispute a conflict or controversy, a conflict of claims or rights should be apparent from the reply as contemplated by Section 8(2). The Corporate Debtor is not to raise bogie of disputes but there has to be real substantial dispute. The existence of dispute when the Demand Notice was issued is mandatory condition for exercising jurisdiction to reject the Application by the Adjudicating Authority as is referred to in sub-section (5) of Section 9. The statute uses the expression 'existence of a dispute'. There exists a pre-existing dispute with respect to the store located in Elante Mall, Chandigarh and Pavilion Mall, Ludhiana as far as initiation of proceedings by Operational Creditor against the Corporate Debtor is concerned. Petition dismissed.

Summary

Issues Involved:
1. Quantum of operational debt.
2. Alleged pre-existing dispute.
3. Validity of interest amount claimed.
4. Validity of demand notice.

Detailed Analysis:

1. Quantum of Operational Debt:
The tribunal considered the claim of the applicant regarding the operational debt. The applicant claimed an amount of Rs. 17,13,326/- towards outstanding rentals (including CAM, AHU, Electricity) for the Elante store. The tribunal held that this amount could not be considered as an operational debt as it did not fall within the definition of "Operational Debt" under the Insolvency and Bankruptcy Code, 2016. The tribunal stated that whether this amount is to be reimbursed by the respondent would be a matter of trial between the parties.

2. Alleged Pre-existing Dispute:
The respondent corporate debtor contended that there was a pre-existing dispute between the parties, which was supported by various email correspondences and replies to legal notices. The tribunal examined these documents and found that there was indeed a disagreement between the parties regarding the amount of debt. The tribunal noted that the respondent had raised disputes about the fulfillment of obligations specified in the term sheets, short supply of stocks, and the existence of outstanding debt. The tribunal referred to the Supreme Court's judgment in "Mobilox Innovative Private Limited vs. Kirusa Software Private Limited," which stated that the existence of a real dispute, not spurious or illusory, is sufficient to reject an application under Section 9 of the Code. The tribunal concluded that there was a pre-existing dispute between the parties before the issuance of the demand notice.

3. Validity of Interest Amount Claimed:
The applicant claimed an interest amount of Rs. 79,88,730/- calculated at 18% p.a. from the date of the last payment. The respondent disputed this claim, arguing that the rate of interest was not specified in the invoices or the term sheet. The tribunal did not delve into quantifying the operational debt as the principal amount due was above the minimum threshold of Rs. 1 Crore stipulated in Section 4 of the Code.

4. Validity of Demand Notice:
The respondent challenged the validity of the demand notice dated January 30, 2020, arguing that it was not in terms of the IB Code as no authorization was enclosed authorizing any director on behalf of the Operational Creditor to appoint counsel to send the notice. The respondent also argued that the requirement under Section 9(3)(c) of the IB Code was not met as the applicant did not enclose any email/letter seeking the said certificate from a financial institution. The tribunal did not specifically address these contentions in the final decision.

Conclusion:
The tribunal concluded that there was sufficient evidence of a pre-existing dispute between the parties before the issuance of the demand notice. The tribunal found that the defence raised by the respondent was not spurious, frivolous, or vexatious. Consequently, the tribunal dismissed the petition filed by the applicant for initiating the Corporate Insolvency Resolution Process against the respondent corporate debtor. The petition was dismissed with no order as to costs, and the file was consigned to the record room.