2018 (11) TMI 1537 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - outstanding debt - Held that - The Corporate Debtor admitted the liability in the letters addressed to MMRDA and further acknowledged liability in the letter addressed to the Operational Creditor. Thus, Corporate Debtor committed default. Demand notice under Section 8 was also issued and there was no reply and no dispute was raised. The Operational Creditor filed bank statement to prove that no payment from the side of Corporate Debtor. The Petition is therefore liable to be admitted. The Petition is in order. Hence Petition is admitted. The Operational Creditor has filed a fresh Form-2, the consent given by Mr. Rakesh Rathi having IP registration No. IBBI/IPA-001/IP-P00696/2017-18/11211 to act as Interim Resolution Professional. Hence, the Adjudicating Authority admits this Petition under Section 9 of IBC, 2016, declaring moratorium for the purposes referred to in Section 14 of the Code

Issues Involved:
1. Default in repayment of operational debt.
2. Validity of the Letter of Intent (LOI) and subsequent amendments.
3. Submission of Performance Bank Guarantee.
4. Raising of RA Bills and issuance of interim payment certificates.
5. Dispute over the amount claimed and reconciliation of accounts.
6. Claim for interest under MSME Act.
7. Admission of the petition under Section 9 of IBC.

Detailed Analysis:

1. Default in Repayment of Operational Debt:
The petition was filed by the Operational Creditor, alleging that the Corporate Debtor defaulted in repaying a sum of ?4,16,97,565 under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Operational Creditor provided construction services to the Corporate Debtor, which was engaged in various infrastructure projects. Despite submitting bills amounting to ?4,02,34,399, only ?96,00,000 was paid, leading to the claim of default.

2. Validity of the Letter of Intent (LOI) and Subsequent Amendments:
The Operational Creditor relied on the LOI dated 17.05.2013, which was amended twice. The Corporate Debtor contended that the LOI was not a concluded contract and required a Performance Bank Guarantee. However, the Tribunal found that the LOI and its amendments were acted upon, as evidenced by part payments made by the Corporate Debtor and the issuance of interim payment certificates.

3. Submission of Performance Bank Guarantee:
The Corporate Debtor argued that the Operational Creditor did not furnish the required Performance Bank Guarantee, which was a condition for the LOI. The Tribunal held that the condition was waived, as the Corporate Debtor did not cancel the LOI and continued to engage the Operational Creditor, issuing amended LOIs and making payments.

4. Raising of RA Bills and Issuance of Interim Payment Certificates:
The Operational Creditor raised 11 RA Bills, and the Corporate Debtor issued 12 interim payment certificates. The Tribunal noted that the interim payment certificates and the payments made by the Corporate Debtor indicated that the work was executed as per the LOI and its amendments. The Corporate Debtor's contention that the RA Bills were inflated was not substantiated.

5. Dispute Over the Amount Claimed and Reconciliation of Accounts:
The Corporate Debtor claimed that the amount due was subject to reconciliation and that the claim was time-barred. The Tribunal found that the Corporate Debtor admitted liability in letters addressed to MMRDA and the Operational Creditor. The Tribunal held that the Corporate Debtor's failure to raise a dispute at the time of the demand notice weakened its position.

6. Claim for Interest Under MSME Act:
The Operational Creditor claimed interest under the MSME Act, 2006, at 18% per annum. The Corporate Debtor argued that the claim for interest was unsubstantiated. The Tribunal held that the Operational Creditor was entitled to claim interest for delayed payment, even though there was no provision for interest in the LOI. The Tribunal found that claiming interest was not against the law.

7. Admission of the Petition Under Section 9 of IBC:
The Tribunal admitted the petition under Section 9 of the IBC, 2016, as the Operational Creditor established that the Corporate Debtor committed default in paying the operational debt. The Tribunal declared a moratorium and appointed an Interim Resolution Professional (IRP) to initiate the Corporate Insolvency Resolution Process (CIRP).

Conclusion:
The Tribunal admitted the petition, declaring a moratorium and appointing an IRP. The Corporate Debtor's contentions regarding the validity of the LOI, the requirement of a Performance Bank Guarantee, and the dispute over the amount claimed were not upheld. The Tribunal found that the Operational Creditor was entitled to the claimed amount and interest for delayed payment.

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