2019 (9) TMI 892 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in repayment of amount - pre-existing dispute or not - HELD THAT - The main contention of the Corporate Debtor that Operational Creditor was liable to pay an amount of ₹ 7.5 lakhs in addition to the amount already paid. The main case of Corporate Debtor that Operational Creditor agreed to pay the sum but however it did not pay. This dispute existed prior to the demand notice issued on behalf of Operational Creditor. The Operational Creditor was to further release ₹ 7.5 lakhs. He failed to pay and Corporate Debtor therefore demanded this money which arises in connection with MSA and both parties admitted having entered into MSA. The Corporate Debtor also issued reply to the demand notice raising dispute. The Corporate Debtor filed certain documents which are e-mails issued from time to time but the fact remains the agreed amount of ₹ 7.5 lakhs was not paid by the Operational Creditor to the Corporate Debtor. This is a pre-existing dispute between the parties. If ₹ 7.5 lakhs was paid to the Corporate Debtor, then Corporate Debtor would have completed the task orders under MSA. Long back dispute was raised before filing the petition. Though email correspondence was filed by the Operational Creditor, yet there was dispute between the parties over payment of balance. Therefore, Petition is liable to be rejected on these grounds. The Petition is liable to be rejected as there was pre-existing dispute between the parties - petition dismissed.

Issues Involved:
1. Whether the petitioner qualifies as an "Operational Creditor" under the Insolvency and Bankruptcy Code, 2016.
2. Whether there was a pre-existing dispute between the parties before the initiation of the Corporate Insolvency Resolution Process (CIRP).
3. Whether the debt claimed by the petitioner falls under the definition of "Operational Debt."
4. Whether the petition is maintainable under the Insolvency and Bankruptcy Code, 2016.

Issue-Wise Detailed Analysis:

1. Whether the petitioner qualifies as an "Operational Creditor" under the Insolvency and Bankruptcy Code, 2016:
The petitioner claimed to be an Operational Creditor, asserting that the Corporate Debtor defaulted in rendering services for which an advance payment of ?23,00,000 was made. The petitioner argued that the amount paid was for services to be rendered under a Master Services Agreement (MSA) dated 15.05.2016, which included four task orders. The Corporate Debtor's failure to deliver the final product dossiers by the stipulated date constituted a default. The tribunal acknowledged that the petitioner paid the amount for services, which qualifies as an operational debt, thereby recognizing the petitioner as an Operational Creditor.

2. Whether there was a pre-existing dispute between the parties before the initiation of the CIRP:
The Corporate Debtor contended that there was a pre-existing dispute regarding the payment of an additional ?7,50,000, which the petitioner had agreed to pay for additional expenses incurred by the Corporate Debtor. This dispute was evidenced by email correspondences and meeting minutes from May 2018, indicating that the petitioner acknowledged the liability but later imposed conditions on the payment. The tribunal found that the dispute over the additional payment existed before the demand notice was issued, thus constituting a pre-existing dispute.

3. Whether the debt claimed by the petitioner falls under the definition of "Operational Debt":
The petitioner argued that the debt arose from the non-completion of task orders under the MSA, making it an operational debt. The tribunal noted that the MSA and task orders were not fulfilled by the Corporate Debtor, and the petitioner had paid ?23,00,000 as an advance for these services. The tribunal concluded that the amount paid for services qualifies as operational debt under the Insolvency and Bankruptcy Code, 2016.

4. Whether the petition is maintainable under the Insolvency and Bankruptcy Code, 2016:
The Corporate Debtor argued that the petition is not maintainable due to the pre-existing dispute and the petitioner's failure to pay the additional ?7,50,000. The tribunal examined the correspondences and found that the petitioner had agreed to pay the additional amount but later imposed conditions for its payment. Given the pre-existing dispute, the tribunal held that the petition is not maintainable under the Insolvency and Bankruptcy Code, 2016.

Conclusion:
The tribunal concluded that there was a pre-existing dispute between the parties regarding the payment of ?7,50,000, which existed before the demand notice was issued. Consequently, the petition was rejected on the grounds of the pre-existing dispute, rendering it not maintainable under the Insolvency and Bankruptcy Code, 2016. The tribunal emphasized that the existence of a dispute prior to the demand notice precludes the initiation of the Corporate Insolvency Resolution Process.

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