2022 (9) TMI 169 - 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 - time limitation - Adjudicating Authority upon perusing the record prima facie observes that the outstanding amount of US 228,924 as claimed in Part-IV of Form-5 of the petition is barred by limitation - HELD THAT - On perusal of pt. 2 of Part-IV of the Form -5, it is observed that according to the Applicant, a total of 5 invoices dated 10.09.2009, 10.09.2009, 11.09.2009, 22.09.2009 and 22.09.2009 raised by the applicant were in default and as per the terms of the invoice, the debt became payable 90 days after B/L date. It is further observed that the applicant sent demand notice dated 05.03.2012 under Section 433(e), 434 of the Companies Act, 1956 to the corporate debtor demanding the alleged outstanding dues, pursuant to which the applicant had filed winding up petition under Section 433 and 434 of the Companies Act, 1956 being Company Petition No. 464/2012 against the corporate debtor in the Hon'ble High Court of Delhi. The Hon'ble Supreme Court in B.K. Educational Services (P) Ltd. v. Parag Gupta Associates 2018 (10) TMI 777 - SUPREME COURT held that the Limitation Act would apply to applications filed under Sections 7 and 9 of the IBC. The Hon'ble Supreme Court in a catena of Judgement 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. 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. There exists dispute between the parties with regard to the same cause of action i.e., outstanding payment of operational debt of USD 228,924 as claimed in Part IV of the Form 5 and the applicant is indulging in the act of forum shopping by pursuing the present petition before this Tribunal. Further, from the series of acts we infer that the applicant is trying to waste the valuable time of this Adjudicating Authority, which practice is required to be deprecated - in order to dissuade the practice of consciously filing petition under Section 9 of the Code by willfully concealing the fact that there exists a pre-existing dispute between the parties and also filing multiple proceedings before other fora for the same cause of action, and thereby wasting the valuable time of this Adjudicating Authority, the present Application entails an imposition of Costs. The application stands dismissed with the costs of Rs. 1,00,000/- to be paid by the applicant.

Summary

Issues Involved:
1. Limitation of the claim.
2. Service of demand notice.
3. Pre-existing dispute between parties.
4. Forum shopping and misuse of judicial process.

Detailed Analysis:

1. Limitation of the Claim:
The Tribunal first examined the issue of limitation. The outstanding amount of USD 228,924 was claimed based on invoices from September 2009, which became payable 90 days after the B/L date. The applicant served a demand notice on 05.03.2012 and filed a winding-up petition under the Companies Act, 1956. The Supreme Court in B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates clarified that the Limitation Act applies to applications under Sections 7 and 9 of the IBC. The Tribunal concluded that since the winding-up petition was filed within three years from the default date and was transferred to the NCLT, the instant application filed on 10.01.2019 was within the limitation period.

2. Service of Demand Notice:
The corporate debtor contended that the demand notice dated 15.10.2018 was not served. The Tribunal found that the notice was duly served at the corporate debtor's registered office on 20.10.2018, as evidenced by the track report. Thus, the contention of non-service was rejected.

3. Pre-existing Dispute Between Parties:
The corporate debtor argued that there was a pre-existing dispute, citing breaches of the distribution agreement and financial losses due to the applicant's actions. They provided evidence of correspondence and previous legal proceedings, including winding-up petitions and claims for compensation. The Tribunal referred to the Supreme Court's rulings in Mobilox Innovative Private Limited vs. Kirusa Software Private Limited, which emphasized that a real, substantial dispute must exist to reject an application under Section 9. The Tribunal observed that the corporate debtor had shown sufficient particulars of a dispute existing before the issuance of the demand notice.

4. Forum Shopping and Misuse of Judicial Process:
The Tribunal noted that the applicant had previously pursued multiple legal proceedings for the same cause of action, indicating forum shopping and an attempt to waste judicial resources. The Tribunal condemned this practice and emphasized the need to preserve the integrity of the judicial process.

Conclusion:
Based on the findings, the Tribunal dismissed the petition under Section 9 of the IBC, 2016, with costs of Rs. 1,00,000/- to be paid by the applicant to the PM Relief Fund within 14 days. The Tribunal directed the applicant to file an affidavit of compliance and sent the case folders and connected papers to the record room.