2020 (9) TMI 508 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - pre-existing dispute or not - HELD THAT - Before issuance of the demand notice, the Corporate Debtor vide email dated 26.02.2019, informed the Petitioner to remove all site establishments and equipment along with the material from the site immediately. The Petitioner was requested to coordinate with the team for signing the documents relating to joint records of the survey carried out by the Petitioner and terminated the contract - There has been an exchange of series of emails wherein the Corporate Debtor has alleged breach of contractual obligations to complete the project, provides safety to workers at site, absence of appropriate work permits, failure on the part of Petitioner to improve work conditions at site, failure of the Petitioner to appoint representative to have the quality check, constant labor strike, breach of general terms and conditions of contract more particularly clause 14.2(1) and (3) which categorically states that all RA bills shall have an attach duly certified material reconciliation statement. It is clearly established that the claim of the Petitioner is not a debt and does not demonstrate as the debt under Section 5(21) of the Code. The Corporate Debtor has raised disputes regarding quality of the Petitioner s work, the bills raised by the Petitioner were not duly certified on the basis of joint measurement, non-following due process of certificate of payment and RA Bill no. 4 was issued after issuance of final bill. Therefore, by no stretch of imagination, the Petitioner is entitled to any relief under IBC Code when there are serious disputes raised about the admission of the claim by the Corporate Debtor. Thus, this tantamount to a pre - existing dispute between parties - petition dismissed.

Summary

Issues:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for default in payment.
2. Disputed claims and allegations raised by the Corporate Debtor against the Petitioner.
3. Compliance with the provisions of the Insolvency & Bankruptcy Code.

Analysis:

Issue 1: Initiation of CIRP
The Petitioner filed a Company Petition seeking to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor for defaulting on payment amounting to ?20,34,39,283. The Petitioner alleged that despite completing work and issuing invoices, the Corporate Debtor failed to make payments, leading to the demand notice being sent under Section 8 of the Insolvency & Bankruptcy Code.

Issue 2: Disputed Claims
The Corporate Debtor contested the claims made by the Petitioner, arguing that the invoices raised were not valid operational debts. They raised contentions regarding the termination of the contract, quality of work, breach of contractual obligations, and disputed the amounts claimed by the Petitioner. The Corporate Debtor highlighted various instances of non-compliance and breaches by the Petitioner, including safety concerns, labor strikes, and inadequate work quality.

Issue 3: Compliance with the Code
The Tribunal analyzed the emails exchanged between the parties, where the Corporate Debtor clearly raised disputes regarding the claims made by the Petitioner. Citing the judgment in Mobilox Innovations Pvt. Ltd. v/s. Kirusa Software, the Tribunal emphasized the need for a genuine dispute to exist for rejecting an insolvency application. As disputes were evident from the communications between the parties, the Tribunal concluded that the Petition lacked merit and deserved dismissal.

In conclusion, the Tribunal dismissed the Petitioner's application for initiating CIRP against the Corporate Debtor due to the existence of pre-existing disputes and lack of valid operational debts as per the provisions of the Insolvency & Bankruptcy Code.