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2023 (7) TMI 312 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - privity of contract - HELD THAT - In Form 3 Demand Notice / Invoice demanding payment under I B Code 2016 as per Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016 dated 30.07.2021 addressed to the Vantage Machine Tools Private Limited represented by Mr. Pothluru Mohana Murali Krishna Krishna District under Particulars of Operational Debt the Total Debt as on 22.07.2021 was mentioned as Rs.3, 04, 76, 004/- and the Principal Outstanding was mentioned as Rs.1, 53, 16, 611/-. The interest outstanding as on 22.07.2021 was Rs.1, 51, 59, 393/- and that the total Outstanding as on 22.07.2021 was Rs.3, 04, 76, 004/-. The Corporate Debtor in its Counter before the Adjudicating Authority had averred that the alleged Principal Amount claimed by the 1st Respondent / Operational Creditor / Petitioner and Interest claimed thereon as consequential damages is completely arbitrary and baseless which cannot be relied upon in the absence of adjudication and further that the alleged Claim was not adjudicated by any Competent Authority in Law and therefore such a Claim cannot be described as Operational Debt. The Corporate Debtor before the Adjudicating Authority / Tribunal took a stand that the alleged Claim of the 1st Respondent / Operational Creditor / Petitioner was based on misconstruction of facts devoid of merits and as such the Company Petition was not maintainable in Law and the same was liable to be dismissed. It is to be remembered that the Proceedings under the I B Code 2016 are Summary in Character and that an Adjudicating Authority not being a Recovery Fora or Court (no elaborate enquiry is conducted like that of a Regular Trial of a Civil case and also it does not determine a Money Claim or Civil Suit this Tribunal is of the earnest opinion that the Controversy / Dispute / Claim in respect of Interest based on Privity of Contract or otherwise has no relevance / significance if the Debt payable is more than the threshold limit of Section 4 of the I B Code 2016 considering the fact that the Principal Outstanding as mentioned in Form 3 of the Demand Notice dated 30.07.2021 was Rs.1, 53, 16, 611/- (which is more than Rs.1 Crore) to be paid by the Corporate Debtor / M/s. Vantage Machine Tools Private Limited. In Law once the Debt shown as Due it is for the Corporate Debtor to establish that there are no Outstanding Dues to be paid to an Operational Creditor. This Tribunal points out that the aspect of determining a Claim which may include the interest by an Adjudicating Authority / Tribunal does not arise for the purpose of triggering the Corporate Insolvency Resolution Process because of the fact that an initiation of Corporate Insolvency Resolution Process under Section 7 or 9 of the I B Code 2016 will not amount to a Recovery Proceeding - It cannot be lost sight off that it is incumbent upon the Corporate Debtor to show that its Liability is in Dispute as to the Debt and not a just demand made by it to satisfy certain obligations on the part of the 1st Respondent / Operational Creditor / Petitioner. In the instant case on hand this Tribunal considering the contentions advanced on the respective sides taking into account of the Part Payments made by the Corporate Debtor under Invoices and keeping in mind of the Email dated 02.11.2017 whereby the Debt confirmation was made by the Corporate Debtor and the same being received by the 1st Respondent / Operational Creditor / Petitioner on 03.11.2017 considering the fact that the Part Payment of Rs.10, 00, 000/- and another payment for Rs.20, 00, 000/- by the Corporate Debtor was made one day earlier on to the mail dated 03.10.2017 and keeping in mind of the facts and circumstances of the instant case in an encircling manner comes to a consequent conclusion that the Debt and Default committed by the Corporate Debtor were established by the 1st Respondent / Operational Creditor / Petitioner and hence the Outstanding Debt is due and payable in Law by the Corporate Debtor to the 1st Respondent / Operational Creditor / Petitioner and that the Admission of the CP(IB) No.51 / 9 / AMR / 2021 by the Adjudicating Authority (National Company Law Tribunal Amaravati Bench) is a just Valid and Proper one in the eye of Law. Appeal dismissed.
Issues Involved:
1. Maintainability of the Appeal by the Promoter/Shareholder. 2. Existence of Pre-existing Disputes. 3. Inclusion of Interest in the Operational Debt. 4. Relevance of Test Certificates and Quality of Goods. Summary: 1. Maintainability of the Appeal by the Promoter/Shareholder: The Tribunal recognized the right of a promoter/shareholder to file an appeal against the admission of a Corporate Insolvency Resolution Process (CIRP) as an "Aggrieved Person." This is supported by precedents such as Innoventive Industries Ltd. v. ICICI Bank & Another, where the Supreme Court allowed appeals by promoters/shareholders when their management rights are affected. 2. Existence of Pre-existing Disputes: The Appellant argued that there were numerous pre-existing disputes, including non-production of test certificates, poor quality of goods, and disputed liability. The Tribunal referred to the Supreme Court's decision in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., which mandates that the existence of a dispute must be plausible and not a patently feeble legal argument. The Tribunal found that the disputes raised by the Appellant were not substantiated with concrete evidence and thus did not qualify as pre-existing disputes that could prevent the initiation of CIRP. 3. Inclusion of Interest in the Operational Debt: The Appellant contended that the interest claimed was not part of the original contract and thus should not be included in the operational debt. The Tribunal noted that interest could be included as part of the operational debt under Section 61 of the Sale of Goods Act, 1930, and that the principal outstanding amount exceeded the threshold limit for initiating CIRP. The Tribunal held that the inclusion of interest did not invalidate the claim. 4. Relevance of Test Certificates and Quality of Goods: The Appellant argued that the quality of goods supplied was inferior and that test certificates were not provided as per the contract. The Tribunal observed that the Appellant had accepted the goods without immediate objection and had made part payments, which indicated acceptance of the goods. The Tribunal also noted that the Appellant had not taken any legal steps to resolve the issue of test certificates or quality of goods before the initiation of CIRP. Conclusion: The Tribunal dismissed the appeal, affirming the admission of the CIRP by the Adjudicating Authority. The Tribunal found that the Appellant failed to establish the existence of pre-existing disputes and that the inclusion of interest in the operational debt was permissible. The Tribunal also held that the issues related to test certificates and quality of goods did not constitute valid grounds to dispute the operational debt.
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