2020 (7) TMI 323 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - There is no formal contract between the Operational Creditor and Corporate Debtor relating to the Job or Service undertaken/to be undertaken - No evidence record of Debt or acknowledgement letter from the Corporate Debtor is made available by the Operational Creditor. Application rejected.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP).
2. Non-payment of outstanding dues by the Corporate Debtor.
3. Validity and sustainability of the petition under the Insolvency and Bankruptcy Code, 2016.
4. Existence of pre-existing disputes between the parties.
5. Admissibility of the petition based on the limitation period.
6. Adequacy of documentation and evidence provided by the Operational Creditor.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Operational Creditor filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of CIRP against the Corporate Debtor due to non-payment of dues amounting to INR 11,18,530.00. The petition was filed on 26.11.2018.

2. Non-payment of Outstanding Dues by the Corporate Debtor:
The Operational Creditor claimed that it supplied machinery parts and services to the Corporate Debtor and raised several invoices from 30/05/2014 to 28/05/2016, which remained unpaid. The total outstanding amount claimed was INR 11,18,530.00, including interest.

3. Validity and Sustainability of the Petition under the Insolvency and Bankruptcy Code, 2016:
The Corporate Debtor contested the petition, stating it was not filed as per the legal format and lacked necessary supporting documents. The Corporate Debtor denied the allegations, claiming the petition was filed with malafide intentions to pressurize them into paying alleged illegal demands.

4. Existence of Pre-existing Disputes Between the Parties:
The Corporate Debtor argued that there were pre-existing disputes regarding the transactions and the amounts claimed. They asserted that the invoices and delivery challans were not admitted by them and lacked proper seals or signatures. The Corporate Debtor also contended that the Operational Creditor failed to return residual raw materials and metal scrap, which was part of their understanding.

5. Admissibility of the Petition Based on the Limitation Period:
The Tribunal noted that most invoices were more than three years old, except for two invoices amounting to INR 73,008.00. The petition was filed after the limitation period for most invoices, making them inadmissible.

6. Adequacy of Documentation and Evidence Provided by the Operational Creditor:
The Tribunal observed that there was no formal contract between the parties regarding the job or service undertaken. Additionally, there was no evidence of debt acknowledgment from the Corporate Debtor. The Tribunal found discrepancies in the invoices, with some being unsigned and others not meeting the minimum default amount required for admission under Section 9 of the IBC.

Order:
The Tribunal rejected the application for the following reasons:
1. Eight invoices were beyond the three-year limitation period.
2. One invoice within the limitation period was unsigned.
3. The remaining invoice amount was below the minimum default amount required.
4. Lack of a formal agreement between the parties.
5. No written acknowledgment of debt from the Corporate Debtor.
6. The payment made by the Corporate Debtor was for specific earlier invoices, not the ones in dispute.

The application was dismissed with no costs, and the Registry was directed to communicate the order to both parties through registered post/speed post.