2020 (10) TMI 486 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Dishonor of Cheque - pre-existing dispute or not - time limitation - HELD THAT - As per the record, the said cheque got dishonoured / remained un-cleared due to insufficient funds and for exceeds arrangements. The Petitioner has enclosed a copy of the dishonoured cheque. The fact of this cheque as issued by the Corporate Debtor has not been disputed or denied by the Corporate Debtor but it only made attempt to explain that the Petitioner falsely represented to the Respondent that the final bill amount was going to be released by the concerned government department (P.W.D. Khandwa) and such amount would get credited soon in the Respondent's account. Therefore, on such expectation, Petitioner managed to obtain a cheque of ₹ 17,90,000/-from the Respondent/ Corporate Debtor, the same was issued by considering long and healthy professional relationship with the Petitioner. The Corporate Debtor further made an attempt to explain that such cheque got dishonoured due to such false claim made by the Petitioner. However, it is evident that no such contention was ever made or such plea is taken by the Respondent, prior to issue of Demand Notice. It is a matter of record that the said cheque was properly presented before the Bank but it got dishonoured by the Bank due to insufficient funds/ exceeds arrangement and not for any other reason. Thus, such alleged act on the part of the respondents attracts penal provision of the Section 138 of the Negotiable Instruments Act. Hence, such contention of Corporate Debtor is without proof and substance. Hence, it is not acceptable being an afterthought plea. Time Limitation - HELD THAT - It is a matter of record that the Petitioner duly performed his part of contract /agreement and was getting regular payments time to time from the Corporate Debtor. So, this may be the position in respect of present cheque also, which got dishonoured by the Bank for want of sufficient funds. That shows that the Corporate Debtor has admitted its debt liability to the extent of amount mentioned in the cheque, i.e. ₹ 17,90,000/- and which undisputedly is above rupees one Lakh to make eligible the Petitioner to trigger the Corporate Insolvency Resolution Process in respect of the Corporate Debtor. As the above stated cheque was issued on 29.08.2017 and presented before the concerned branch of the Bank on 15.11.2017, while the present petition is found to be filed on 09.02.2018, hence, it is filed well within the limitation. In the present matter that the Respondent himself has admitted in its reply that the above stated cheque was issued on the request of the Applicant for settling of amount of contract and in order to maintain good relationship with the Petitioner. This means that the Corporate Debtor has admitted its liability for making payment of debt towards settlement of its contract has it voluntarily and bonafiedly issued such cheque in the favour of the Petitioner. The Respondent did not produce in writing any protest letter issued immediately thereafter as an attempt to stop the payment. Therefore, such plea taken by the Respondent appears to be an afterthought plea and devoid of merits. Hence, the default is well established. The present I.B. Petition is found complete to initiate CIRP in respect of the Corporate Debtor. Therefore, the present I.B. Petition deserves admission - Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Existence of Operational Debt and Default
3. Pre-existing Dispute
4. Limitation Period

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petition was filed by M/s. Phalashri Estates (P) Ltd. under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of CIRP against M/s. Orion Contractors Pvt. Ltd. The petitioner claimed an outstanding operational debt of ?21,00,678, for which a cheque of ?17,90,000 was issued by the respondent but was dishonored.

2. Existence of Operational Debt and Default:
The petitioner executed various work contracts sublet by the respondent and claimed outstanding dues. The respondent admitted issuing a cheque for ?17,90,000, which was dishonored due to insufficient funds. The tribunal found that the issuance and dishonor of the cheque established the respondent's debt liability, fulfilling the criteria for initiating CIRP as the amount exceeded ?1 lakh.

3. Pre-existing Dispute:
The respondent contended that there was a pre-existing dispute and no default was committed. They argued that the petitioner did not complete the work, leading to additional costs for the respondent. However, the tribunal noted that the respondent did not raise these disputes prior to the demand notice and found the defense to be an afterthought without merit.

4. Limitation Period:
One member of the tribunal opined that the application should be rejected on the ground of limitation, citing a nine-year gap between the cause of action and the issuance of the cheque. They argued that the continuity of liability was not established as there was no proof of debt acknowledgment from 2008 to 2017. However, the majority decision did not accept this view and proceeded with the admission of the petition.

Conclusion:
The tribunal admitted the petition, initiating CIRP against the respondent. An Interim Resolution Professional was appointed, and a moratorium was declared as per Sections 13 and 14 of the Insolvency and Bankruptcy Code. The tribunal emphasized that the respondent's defense lacked merit and the dishonored cheque substantiated the operational debt and default.