2018 (10) TMI 195 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process (CIRP) - whether there is Operational Debt which became due and payable by the Respondent to the Operational Creditor /Petitioner? - non-payment of debt - Held that - In the case on hand Respondent did not submit even the PDCs. Even before the submission of PDCs there was correspondence between the petitioner and respondent in the form of e-mail which is referred to in page Nos. 39 and 40 of the Counter. There appears to be disputes between the Petitioner and Respondent for non-submission of PDCs as per MoM dated 24.04.2017. Above all whether non-submission of PDCs which are treated as securities creates any liability or obligation in respect of claim which is due from the Corporate Debtor to the Petitioner/Operational Creditor. The non-submission of PDCs by the Respondent to the Petitioner may at best amount to breach of terms of MoM but it cannot be equated with debt due and payable. Pausing for a movement even if PDCs were submitted by the Corporate Debtor to the Operational Creditor Operational Creditor is not automatically entitled to realise those PDCs unless and until the activities mentioned in payment schedule-2 in respect of PDC-1 and PDC-2 respectively have been completed. Therefore the non-submission of PDCs as securities or even otherwise do not amount to debt due and payable. When the debt is not due and payable Petitioner cannot treat it as a claim and cannot call it as operational debt . In view of the findings there is no debt due and payable the question of payment of the same do not arise. Therefore there exists no operational debt which has become due and payable. When once this authority comes to the conclusion that there is no Operational Debt due and payable there is no need to dwell on the aspect whether there exist a dispute in respect of Operational debt prior to the issuance of the Demand Notice.

Summary

Issues Involved:
1. Whether there is an operational debt due and payable by the Corporate Debtor to the Operational Creditor.
2. Compliance with the conditions stipulated in the Memorandum of Understanding (MoM) dated 24.04.2017.
3. The existence of a bona fide dispute regarding the operational debt claimed by the Petitioner.
4. The impact of non-submission of Post Dated Cheques (PDCs) on the claim of operational debt.

Detailed Analysis:

1. Whether there is an operational debt due and payable by the Corporate Debtor to the Operational Creditor:
The Tribunal examined whether the claim made by the Petitioner for the services rendered in connection with the Corporate Debtor's power project qualifies as an "operational debt" under Section 5(21) of the Insolvency and Bankruptcy Code, 2016. The Tribunal confirmed that the claim could be treated as an operational debt. However, it emphasized that for a debt to be considered due and payable, it must meet the criteria set out in Section 3(11) and Section 3(12) of the Code. The Tribunal noted that the non-submission of PDCs by the Corporate Debtor does not automatically create a liability or obligation that is due and payable.

2. Compliance with the conditions stipulated in the Memorandum of Understanding (MoM) dated 24.04.2017:
The Tribunal referred to the MoM, which outlined a payment schedule where the Corporate Debtor was to submit PDCs totaling Rs. 4.74 crores as a security measure. The realization of these PDCs was contingent upon the completion of specific activities. The Tribunal found that the Petitioner did not establish the completion of these activities, which were prerequisites for the realization of the PDCs. Therefore, the non-submission of PDCs by the Corporate Debtor could not be equated with a debt that is due and payable.

3. The existence of a bona fide dispute regarding the operational debt claimed by the Petitioner:
The Tribunal considered the objections raised by the Corporate Debtor, which included allegations of breach of various obligations by the Petitioner, delays in project completion, and substandard performance of the Wind Turbine Generators (WTGs). The Corporate Debtor also claimed that the Petitioner failed to fulfill conditions stipulated in the MoM, which affected the project's viability and financial stability. The Tribunal concluded that these objections constituted a bona fide dispute, which vitiates the maintainability of the Petitioner's claim.

4. The impact of non-submission of Post Dated Cheques (PDCs) on the claim of operational debt:
The Tribunal emphasized that the non-submission of PDCs, which were intended as security measures, does not amount to a debt that is due and payable. Even if the PDCs had been submitted, their realization was contingent upon the completion of specific activities as outlined in the MoM. The Tribunal found that the Petitioner failed to demonstrate the completion of these activities, and thus, the non-submission of PDCs could not be treated as an operational debt.

Conclusion:
The Tribunal concluded that there was no operational debt due and payable by the Corporate Debtor to the Petitioner. The non-submission of PDCs did not create a liability or obligation that was due and payable. Additionally, the existence of a bona fide dispute further vitiated the maintainability of the Petitioner's claim. Consequently, the Petition was rejected.