2022 (8) TMI 66 - 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 -The Corporate Debtor has raised a counter-claim of greater amount on the basis of deficiency of services by the Operational Creditor itself. Further, the Operational Creditor has himself admitted that the Corporate Debtor was duly clearing the dues and honoring various invoices till 2018. About 2018 onwards, the work allegedly came to halt or became delayed and it was only around that time that as a result of non-delivery of drawings by the Operational Creditor, the Corporate Debtor defaulted in the payment of invoice number 27 dated 24.10.2018, invoice no. 28 dated 28.03.2018 amounting to 6,30,000, invoice number 24R1 dated 28.03.2018 amounting to 3,90,000, invoice no. 25R1 dated 28.03.2018 amounting to 6,80,000 and invoice no. 26 dated 28.03.2018 amounting to 250000. This clearly indicates that the default by the Corporate Debtor in payment of these later invoices occurred when the dispute regarding non-delivery of drawings/services by the Operational Creditor arose and lends credence to the claim of the Corporate Debtor that he had repeatedly raised the issue of non-delivery of drawings by the Operational Creditor and which the Operational Creditor had failed to provide timely as per the agreement. There is therefore, a pre-existing dispute and all the claims of the Corporate Debtor were mentioned in the relevant emails annexed under 'Annexure R1' and 'Annexure R2' of the Reply filed by them. After giving careful consideration to the entire matter, hearing the arguments of the learned counsels for the Operational Creditor and the Corporate Debtor; and upon appreciation of the documents placed on record to substantiate the claims, this Adjudicating Authority is of the view that there is a pre-existing dispute under S. 8 r/w S. 9 of Insolvency and Bankruptcy Code, 2016 - Application dismissed.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Existence of pre-existing dispute.
3. Counterclaim by the Corporate Debtor.
4. Compliance with procedural requirements under the Insolvency and Bankruptcy Code, 2016.
5. Allegations of malicious intent and misuse of the insolvency process.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The Applicant, Planners Group Private Limited, sought to initiate CIRP against the Respondent, Ansal Properties & Infrastructure Limited, for an alleged default in clearing a debt of Rs. 27,00,000. The Operational Creditor provided architectural consultancy services to the Corporate Debtor for two real estate projects, "Fernhill, Gurgaon" and "Green Escape, Barota," under work agreements modified over time. Despite the acceptance of invoices, the Corporate Debtor failed to pay certain invoices, leading to the filing of this application.

2. Existence of pre-existing dispute:
The Corporate Debtor argued that there was a pre-existing dispute prior to the issuance of the demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016. The Corporate Debtor claimed deficiencies in the services provided by the Operational Creditor, resulting in significant losses and a counterclaim of INR 19.95 crores. The Corporate Debtor cited the case of Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, where it was held that the existence of a dispute is sufficient to dismiss an insolvency petition.

3. Counterclaim by the Corporate Debtor:
The Corporate Debtor raised a counterclaim of INR 19.95 crores against the Operational Creditor, citing deficiencies such as non-delivery or delay in supply of drawings, which halted project work and led to various disputes and claims by home buyers. The Corporate Debtor argued that these issues resulted in additional costs, including compensation to customers and renewal of licenses, and that the Operational Creditor refused to provide soft copies of drawings even after payments were made.

4. Compliance with procedural requirements under the Insolvency and Bankruptcy Code, 2016:
The Corporate Debtor contended that the application was defective as the affidavit did not comply with the requirements of Section 65A and 65B of the Evidence Act, as held in Anvar P. vs P.K. Basheer. Additionally, the Corporate Debtor argued that the insolvency petition was filed with malicious intent, violating Section 65 of the Code, and that the petition was an attempt to use the insolvency process as a debt recovery mechanism, which is not the purpose of the IBC 2016.

5. Allegations of malicious intent and misuse of the insolvency process:
The Corporate Debtor argued that the Operational Creditor's petition was fraudulent and malicious, aimed at extracting undue amounts rather than resolving insolvency. The Corporate Debtor cited cases such as Transmission Corporation of Andhra Pradesh Limited vs. Equipment Conductors and Cables Limited, where it was held that insolvency petitions are not recovery petitions, and the existence of disputes is sufficient to dismiss the petition.

Judgment:
The tribunal reviewed the documents and arguments presented by both parties. It was noted that the Corporate Debtor had been clearing dues until 2018, after which disputes regarding non-delivery of drawings arose. The tribunal found that the default by the Corporate Debtor occurred when the dispute regarding non-delivery of drawings by the Operational Creditor arose, indicating a pre-existing dispute. The tribunal held that the Operational Creditor was attempting to use the insolvency process as a debt recovery mechanism, which is not the intention of the IBC 2016. Citing relevant case law, the tribunal concluded that the existence of a pre-existing dispute warranted the dismissal of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The application was dismissed, and a copy of the order was to be served to all parties concerned.

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