2023 (7) TMI 1484 - Tri - IBC

Seeking admission of this petition - initiation of Corporate Insolvency Resolution Process (CIRP) - Operation Creditor - debt of a sum over rupees one crore due and payable by the respondent exits or not - existence of dispute between the parties or record of pendency of suit or arbitration proceedings filed before the receipt of the Demand Notice of the unpaid operational debt in relation such dispute - Corporate Debtor is a profit making company having turnover of Rs. 300 crore for the last five financial years - default of mere Rs. 1.31 crores can be a ground to initiate CIRP? Whether the documentary evidence furnished with the application shows that the operational debt of a sum over rupees one crore due and payable by the respondent exists? If so, whether the respondent defaulted in payment of the same? - HELD THAT - Indisputably, in respect of the invoices under which payment has been claimed by the petitioner/operational creditor, the receipt of which has been acknowledged by the respondent, GST has been paid by the petitioner on all these invoices. That apart, part payment in respect of some of these invoices has even been made by the respondent through pre-arrangement of LCs, post claim of audit of the records by the respondent. The Petitioner also enclosed e way bills in respect the goods supplied under the said invoices. The contention of the Petitioner that the respondent had claimed credit input pursuant to filing GST R1 by the Petitioner/operational creditor, is not disputed by the respondent. It is strange that, when it is the case of the Petitioner that the supplies under the invoices were genuinely made after making paying GST, accompanied by e-way bills and the delivery challans, the least that is expected from the respondent which is disputing these invoices is to exercise its statutory right of raising a dispute before the Authorities under the GST, Act stating that the said invoices are fake by submitting GST R-3, so that, the genuineness or otherwise of the subject invoices would have been decided. The Petitioner has established clearly the existence of an operational debt of a sum over rupees one crore due and payable by the respondent and that the same is not paid. Whether there is existence of dispute between the parties or record of pendency of suit or arbitration proceedings filed before the receipt of the Demand Notice of the unpaid operational debt in relation such dispute? - HELD THAT - There is no bar under the law that merely because the Corporate Debtor failed to raise the dispute before the receipt of the demand notice, he shall not raise such dispute in the reply/ counter. It is pertinent to note that when it is the case of the petitioner that the supplies under the invoices were genuinely made after making GST payments accompanied by e-way bills and delivery challans the least that is expected from the Corporate Debtor which is vehemently disputing the invoices is raising a dispute before GST Authorities by submitting GST R-3 to the authorities, so that the genuineness or otherwise of the subject invoices would have been decided by the competent authority under the GST Act. Instead, the respondent lodged an FIR post receipt of Demand Notice, and by placing reliance on the FIR as well as the investigation officer s report, has been contending that there is a pre-existing dispute, which cannot be accepted in preference to the record submitted by the Petitioner, which record has not been disputed until the reply to the demand notice. The plea of pre-existing dispute is spurious, hypothetical, illusory, non-existing and an assertion of fact unsupported by any evidence, the same is rejected. Petition allowed.

Summary

Issues Involved:

1. Existence of operational debt and default by the Corporate Debtor.
2. Existence of any pre-existing dispute between the parties.
3. Whether the Corporate Debtor, being a profit-making company, can be subjected to CIRP.

Detailed Analysis:

1. Existence of Operational Debt and Default:

The petition was filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, claiming an outstanding amount of Rs. 3,79,06,143/- from the Corporate Debtor. The Operational Creditor supplied goods to the Corporate Debtor, which were acknowledged through invoices. The Corporate Debtor made partial payments and issued Letters of Credit for the goods supplied. The Operational Creditor also paid the GST on these supplies, further substantiating the claim. Despite the Corporate Debtor's acknowledgment of the debt through an affidavit dated 15.03.2022, the outstanding amount remained unpaid. The Tribunal found that the documentary evidence, including invoices, GST payments, and the affidavit, clearly established the existence of an operational debt exceeding one crore rupees, which was due and unpaid by the Corporate Debtor.

2. Existence of Pre-existing Dispute:

The Corporate Debtor contended that there was a pre-existing dispute regarding the operational debt, citing alleged fraud and collusion involving its employees and the Operational Creditor. An FIR was lodged post the issuance of the demand notice, alleging fraudulent activities. However, the Tribunal noted that the FIR was filed after the demand notice and that the Corporate Debtor had not raised any dispute regarding the invoices or quality of goods prior to receiving the demand notice. The Tribunal emphasized that a pre-existing dispute must exist before the receipt of the demand notice, and mere allegations in a reply notice do not constitute a genuine dispute. The Tribunal found the Corporate Debtor's defense to be spurious and unsupported by evidence, thus rejecting the claim of a pre-existing dispute.

3. Profit-making Company and CIRP:

The Corporate Debtor argued that as a profit-making company with a substantial turnover, it should not be subjected to CIRP. The Tribunal, however, clarified that solvency does not preclude a company from committing a default. The inability to pay debts and committing default are distinct concepts under the IBC. The Tribunal cited precedents affirming that a company's financial health does not exempt it from insolvency proceedings if there is a default. Hence, the Tribunal dismissed the argument that the Corporate Debtor's profitability should prevent the initiation of CIRP.

Conclusion:

The Tribunal admitted the petition under Section 9 of the IBC, 2016, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. A moratorium was declared, and an Interim Resolution Professional was appointed to carry out the functions as per the Code. The Tribunal directed the necessary procedural actions, including public announcements and communication to relevant authorities, to proceed with the CIRP. The decision underscores the principle that the existence of an operational debt and default, irrespective of the debtor's financial status, is sufficient to trigger insolvency proceedings under the IBC.