2020 (3) TMI 1211 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - debt due and payable or not - HELD THAT - There is no existence of dispute prior to the issuance of demand notice dated December 3, 2018 with regard to dues payable to the first respondent. The appellant/corporate debtor had availed the services of respondent No. 1-operational creditor and in pursuance of the same, the appellant issued cheques to the first respondent and in one of the letters of the appellant (annexed at page 90 of the paper book), it is clearly mentioned that they have issued cheques for ₹ 3 lakhs to be deposited on March 31, 2018. The dispute must be bona fide dispute as held by the hon'ble apex court and this Tribunal in various judgments. The payment of huge cash, which is impermissible, that too, to a third party and trying to adjust the payments due to the operational creditor, i. e., the first respondent herein cannot be recognized. The said dispute is not a bona fide dispute and therefore the Adjudicating Authority has rightly admitted the application. Apart from above, even if ₹ 25 lakhs is held to be paid was to be accepted, admittedly corporate debtor held back ₹ 1 lakh. If the default is ₹ 1 lakh, the insolvency can be triggered against the corporate debtor as per section 4 of the IBC. The appellant in grounds of appeal has stated that the balance of ₹ 1 lakh was withheld by the appellant. Thus the default is admitted. There are no reason to interfere with the order passed by the learned Adjudicating Authority - appeal dismissed.

Summary

Issues:
1. Admission of application under section 9 of the Insolvency and Bankruptcy Code, 2016 against the corporate debtor.
2. Dispute regarding alleged payment of dues and default by the corporate debtor.
3. Validity of the claimed payment of ?25 lakhs in cash to the authorized representative of the operational creditor.
4. Existence of a bona fide dispute prior to the issuance of the demand notice.
5. Adjudication of the dispute and admission of the insolvency application.

Issue 1: Admission of application under section 9 of the Insolvency and Bankruptcy Code, 2016 against the corporate debtor.
The appeal was filed by the appellant, a shareholder of M/s. Lifestyle Fitness P. Ltd., against the order admitting an application under section 9 of the IBC by the Adjudicating Authority. The application was filed by an operational creditor alleging default in payment of dues by the corporate debtor.

Issue 2: Dispute regarding alleged payment of dues and default by the corporate debtor.
The appellant claimed to have issued cheques towards payment of dues to the operational creditor but disputed the total amount claimed to be due. The operational creditor issued a demand notice after the cheques were dishonored, leading to the admission of the application by the Adjudicating Authority based on the lack of satisfactory evidence of any pending dispute or claim by the corporate debtor.

Issue 3: Validity of the claimed payment of ?25 lakhs in cash to the authorized representative of the operational creditor.
The main contention of the appellant was the alleged payment of ?25 lakhs in cash to the authorized representative of the operational creditor. The appellant provided a receipt as evidence of this payment, but the authenticity of the receipt was disputed by the operational creditor. The Tribunal refused to accept the claim of cash payment due to lack of verifiable evidence and recognized the impermissibility of such payments, especially when trying to adjust payments due to the operational creditor.

Issue 4: Existence of a bona fide dispute prior to the issuance of the demand notice.
The Tribunal analyzed the dispute and found that the alleged payment of ?25 lakhs in cash was not a bona fide dispute. It was noted that even if part of the amount was paid, the corporate debtor still withheld ?1 lakh, which constituted a default. The Tribunal emphasized the need for a genuine dispute to exist before the issuance of a demand notice under the IBC.

Issue 5: Adjudication of the dispute and admission of the insolvency application.
After thorough examination of the documents and arguments presented by both parties, the Tribunal upheld the decision of the Adjudicating Authority to admit the application. The Tribunal dismissed the appeal, stating that there was no reason to interfere with the order as the default by the corporate debtor was admitted, and the existence of a bona fide dispute was not established. No costs were awarded in this matter.

This detailed analysis of the judgment highlights the key issues involved in the case and provides a comprehensive overview of the Tribunal's decision regarding each issue.