2020 (1) TMI 764 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment - existence of debt and dispute or not - Section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The Corporate Debtor has placed sufficient material on record vide Report of Architect dated 25.04.2018, its Letter of Termination dated 17.01.2019 and Email dated 02.02.2019 to establish the pre-existing disputes between the Parties. Further, it is observed that the total amount due and payable mentioned in the Demand Notice sent on 30.04.2019 by the Operational Creditor to the Corporate Debtor is ₹ 1,86, 11,538 along with an interest @ of 8% per annum, which is at variance with an amount of ₹ 1,52,52,527 along with an interest of 18% per annum mentioned in the Part IV of the Petition - these disputes require adducing of further evidence and proper investigation into the claims, which can be adjudicated only under Civil Proceedings by the Competent Court. Petition dismissed.

Summary

Issues Involved:
1. Application under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Pre-existing dispute between the parties.
3. Authorization for initiating the Corporate Insolvency Resolution Process (CIRP).
4. Compliance with procedural requirements under IBC, 2016.

Issue-wise Detailed Analysis:

1. Application under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The petition was filed by M/S. Aurotech Infraprojects (Operational Creditor) under Section 9 of the IBC, 2016, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against M/S Garg Heart and Multispecialty Hospital Pvt. Ltd. (Corporate Debtor). The Operational Creditor claimed an unpaid operational debt of ?1,52,52,527 including interest at 18%, which was later stated as ?1,86,11,538 with interest at 8% per annum in the demand notice dated 30.04.2019.

2. Pre-existing dispute between the parties:
The Corporate Debtor opposed the petition on grounds of pre-existing disputes regarding the quality and timeliness of the work performed by the Operational Creditor. The Corporate Debtor highlighted deficiencies in the work through various reports and emails, including a report dated 25.04.2018 and emails dated 25.04.2018, 08.05.2018, and 20.10.2018. The termination of the contract was communicated on 17.01.2019, citing slow progress, poor quality, and inordinate delay. The Corporate Debtor also referenced an email dated 02.02.2019 to substantiate the existence of disputes.

3. Authorization for initiating the Corporate Insolvency Resolution Process (CIRP):
The Corporate Debtor contended that the application lacked specific authorization to initiate CIRP. However, the Operational Creditor had annexed a Board Resolution dated 10.06.2019 authorizing Sh. Hitesh Sharma to file the petition.

4. Compliance with procedural requirements under IBC, 2016:
The Corporate Debtor argued that the Operational Creditor failed to comply with Section 9(3)(c) of IBC, 2016, which requires a certificate from the financial institution maintaining the Operational Creditor's account confirming the non-payment of the operational debt. The Corporate Debtor also pointed out discrepancies in the claimed amounts in the demand notice and the petition.

Judgment:
After hearing both parties, the Tribunal found that the Corporate Debtor had provided sufficient evidence to establish pre-existing disputes, including the Architect’s report dated 25.04.2018, the termination letter dated 17.01.2019, and the email dated 02.02.2019. The Tribunal noted discrepancies in the amounts claimed by the Operational Creditor and emphasized the need for further investigation, which falls under the jurisdiction of Civil Proceedings by a Competent Court. Citing the Supreme Court's judgment in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, the Tribunal concluded that the existence of a dispute necessitates the rejection of the application under Section 9(5)(2)(d) of IBC, 2016. Consequently, the petition was rejected.