2019 (5) TMI 384 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - operational creditor - Form 5 as prescribed in Rule 6(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT - The respondent-corporate debtor continued assigning work to the petitioneroperational creditor under good faith and an understanding that the rates will be rationalized reasonably in the meantime. The Adjudicating Authority cannot go into the issue as to whether this defence is correct or it may or may not be ultimately accepted, but such questions have to be decided in a full trial before the Civil Court. Simply, because some of the invoices paid by the respondent cannot rule out the possibility of a dispute in respect of unpaid invoices where the dispute was raised way back on 03.01.2018, much before the sending of the demand notice under Section 8 of the Code. The present is thus, a case in which there was a pre-existing dispute even before the demand notice was sent. The instant petition is therefore, rejected.

Summary

Issues Involved:
1. Initiation of Insolvency Resolution Process
2. Pre-existing Dispute
3. Validity of Invoices and Rate Card
4. Demand Notice and Response

Detailed Analysis:

1. Initiation of Insolvency Resolution Process:
The petitioner, M/s Inqnest Marketing Solutions Pvt. Ltd., filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Insolvency Resolution Process against the respondent-corporate debtor. The application was filed as per Form 5, in accordance with Rule 6(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The petitioner passed a Resolution on 18.06.2018 authorizing representatives to file the petition and perform necessary acts in the case.

2. Pre-existing Dispute:
The respondent-corporate debtor raised the issue of a pre-existing dispute between the parties. It was argued that the dispute was communicated to the operational creditor in response to the demand notice. The respondent contended that the rates charged by the operational creditor were excessively high compared to industry standards and that no formal agreement on rates was finalized. The respondent also issued a debit note for ?40,85,160/- against certain invoices, reflecting a dispute over the amounts claimed by the petitioner.

3. Validity of Invoices and Rate Card:
The petitioner provided marketing services to the respondent and raised 29 invoices, of which 13 were paid. The respondent disputed the remaining invoices, claiming that the rates were not finalized and were significantly higher than those of other vendors. The petitioner argued that the respondent accepted the rate card and paid some invoices without dispute, implying agreement on the rates. However, the respondent maintained that the rates were under negotiation and not formally agreed upon.

4. Demand Notice and Response:
The petitioner issued a demand notice on 03.04.2018, claiming an outstanding amount of ?1,22,51,940/- plus interest, totaling ?1,28,51,580/-. The respondent replied on 13.04.2018, raising a defense and claiming a refund of advance payments. The respondent's reply referenced an email dated 16.03.2018, which indicated ongoing discussions and disputes over the rates and scope of work. The email highlighted that the respondent had raised objections to the rates and sought rationalization of the charges.

Judgment:
The Tribunal concluded that there was a pre-existing dispute between the parties before the demand notice was issued. The Adjudicating Authority cannot resolve such disputes, which require a full trial in a Civil Court. The Tribunal cited the Supreme Court's decision in Mobilox Innovations Private Limited vs. Kirusa Software Pvt. Ltd., emphasizing that the existence of a genuine dispute necessitates the rejection of the insolvency petition. Consequently, the petition was rejected.

Conclusion:
The Tribunal found that a pre-existing dispute existed, which was communicated before the demand notice. The petition to initiate the Insolvency Resolution Process was rejected, and the matter was deemed suitable for resolution through a full trial in a Civil Court.