2023 (12) TMI 687 - AT - Insolvency and Bankruptcy

Admission of section 9 application - Insurance Company has made payment to the Operational Creditor of its claim - third party liability - Liability of Corporate debtor to discharge its debt - preexisting dispute between the parties - HELD THAT - All relevant documents pertaining to debt and default committed by the Corporate Debtor has been mentioned. The contract between the Operational Creditor and the Insurer was third party contract with which Corporate Debtor was not concerned. The emails were already sent by the Operational Creditor informing the Corporate Debtor that if payments were not made, claim shall be lodged before the Insurer. Thus, the Agreement with the Insurer by the Operational Creditor was communicated to the Corporate Debtor and it cannot be accepted that contract of the Insurer was concealed by the Operational Creditor. The Hon ble Supreme Court in in Economic Transport Organisation v. Oriental Insurance Company Limited 2010 (2) TMI 1264 - SUPREME COURT even held that in case a subrogation, rights of the assured was not put to an end and assured can sue the wrongdoer and recover the damages for the loss. The Hon ble Bombay High Court in Rojee-tasha Stampings Pvt. Ltd. v. POSCO-India Pune Processing Centre Pvt. Ltd. and Anr. 2018 (4) TMI 164 - BOMBAY HIGH COURT after hearing the parties held that third party cannot take shelter and disown its liability of a debt payable to the Company on the basis that insurance transaction has taken place between Respondent and its Insurer. The Corporate Debtor cannot take benefit of the fact that Insurer had paid the claim to the Insured. By payment of the Insurance Company to the Operational Creditor of its claim, the Corporate Debtor cannot be absolved from its liability to discharge its operational debt - it is further noticed that Operational Creditor is under obligation to take proceeding to recover its dues and handover the amount to the Insurance Company and when Operational Creditor has filed Section 9 Application, it is not open for the Corporate Debtor to submit that Application deserves to be rejected, since the amount has been received by the Operational Creditor from the Insurance Company. Section 9 Application is fully maintainable and the fact that Insurance Company has made payment to the Operational Creditor of its claim, cannot be a ground to reject Section 9 Application. The Corporate Debtor is still liable to discharge its liability of debt. Preexisting dispute between the parties - HELD THAT - When the Demand Notice was issued on 03.04.2019 by the Operational Creditor, it was thereafter on 06.04.2019 a reply email was sent by the Corporate Debtor raising all types of frivolous and moonshine defenses. In the reply, which was submitted by the Corporate Debtor, there is no mention of any correspondence between the parties prior to receipt of the Demand Notice. The facts as noted above, indicate that the dues were clearly acknowledged by the Corporate Debtor and several assurances were given for payment of 100% debt. For two years, assurances were given by the Corporate Debtor for clearing the entire outstanding, but only part payment was made on 01.08.2018 by the Corporate Debtor. Thus, the plea taken by the Corporate Debtor in its reply that there is pre-existing dispute is dishonest and moonshine plea. The goods having been received and amounts acknowledged, after two years, the Corporate Debtor cannot be allowed to say that there is pre-existing dispute for which there was no communication, although there were correspondence exchanged for long two years between the parties - Adjudicating Authority has rightly rejected the plea of pre-existing dispute raised on behalf of the Corporate Debtor. The appeal is dismissed.

Summary

Issues Involved:
1. Whether the Operational Creditor's receipt of insurance payment extinguishes the Corporate Debtor's liability.
2. Whether there was a pre-existing dispute between the parties.
3. Whether the Section 9 Application is maintainable.

Summary:

Issue 1: Insurance Payment and Corporate Debtor's Liability
The Appellant argued that since the Operational Creditor received payment from the Insurer, there was no debt due on the Corporate Debtor, and this fact was suppressed, constituting fraud. The Tribunal held that the insurance payment does not absolve the Corporate Debtor from its liability. The Operational Creditor had communicated to the Corporate Debtor that it would lodge a claim with the Insurance Company if payments were not made. The Tribunal referenced the insurance policy clause stating that any amounts received should be remitted to the insurer. The Tribunal cited several judgments, including *Economic Transport Organisation v. Oriental Insurance Company Limited* and *Rojee-tasha Stampings Pvt. Ltd. v. POSCO-India Pune Processing Centre Pvt. Ltd.*, supporting the position that the debtor remains liable even if the creditor received an insurance claim. The Tribunal concluded that the Section 9 Application is maintainable, and the Corporate Debtor's liability persists.

Issue 2: Pre-existing Dispute
The Appellant claimed a pre-existing dispute regarding the quality of goods. The Tribunal found that for two years, the Corporate Debtor acknowledged the debt and assured payment without raising any issues about the goods' quality. The dispute was raised only after the Demand Notice was received, which the Tribunal deemed a dishonest and moonshine plea. The Tribunal upheld the finding of the Adjudicating Authority that there was no pre-existing dispute.

Issue 3: Maintainability of Section 9 Application
The Tribunal addressed the Appellant's claim that the Operational Creditor's non-disclosure of the insurance payment constituted fraud. The Tribunal distinguished the case from precedents like *S.P. Chengalvaraya Naidu v. Jagannath & Ors.*, noting that the insurance contract was a third-party contract and the Corporate Debtor was informed about the potential insurance claim. The Tribunal reiterated that the Corporate Debtor's liability remains, and the Operational Creditor's obligation to return the insurance money does not affect the maintainability of the Section 9 Application.

Conclusion:
The Tribunal dismissed the appeal, allowing the Corporate Debtor 30 days to pay the outstanding amount with interest to the Operational Creditor. If the payment is made, the Adjudicating Authority may close the Section 9 Application. If not, the Authority will proceed with the Corporate Insolvency Resolution Process.