2020 (10) TMI 690 - Tri - IBC

Maintainability of application - initiation of CIRP - Corporate Debtors failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - There are definitely claims and counter-claims which, prima facie, leads to a conclusion that there exists a dispute prior to delivery of the notice under section 8 of IBC, 2016 - As per the decision of the Hon'ble Supreme Court in the case of Mobilox, 2017 (9) TMI 1270 - SUPREME COURT it is to be seen that whether such dispute is real and genuine on the basis of apparent facts and is not feeble to avoid the payment. From the contentions of both the sides, it is apparent that corporate debtor has made counter-claims and even some of the requirements of the purchase order have not been met. Further, no material has been brought to record by the operational creditor to dispute the claims made by corporate debtor in its letter dated 26.07.2017. These facts lead to the inevitable conclusion that there exists a dispute in real sense. Thus, conditions for admissibility of an application filed under Section 9 of IBC, 2016 are not satisfied. Application dismissed.

Summary

Issues:
Application under Section 9 of Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process due to default in payment against the corporate debtor.

Analysis:

Issue 1: Default in Payment
The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by an operational creditor against the corporate debtor for defaulting on payment of outstanding debt amounting to ?13,93,575 along with interest. The operational creditor had sold and supplied building materials to the corporate debtor, who failed to make full payments, leading to the application.

Issue 2: Claims and Counter-Claims
The operational creditor claimed a principal sum of ?13,93,572.96 as outstanding, supported by documentation. However, the corporate debtor contended that the transaction was part of a composite contract involving supplies and execution, with specific clauses related to defect liability. The corporate debtor asserted excess payments made to the operational creditor amounting to ?19,72,963.82, which were recoverable. The corporate debtor highlighted disputes raised prior to the notice under IBC, 2016, emphasizing the existence of a genuine dispute.

Issue 3: Existence of Dispute
Upon reviewing the submissions and evidence presented by both parties, the Tribunal noted the presence of claims and counter-claims, indicating a pre-existing dispute before the notice under Section 8 of IBC, 2016. Referring to the Supreme Court's decision in Mobilox, the Tribunal emphasized the need for a real and genuine dispute based on apparent facts. The corporate debtor's counter-claims and unmet purchase order requirements, coupled with the lack of evidence to refute the claims made by the corporate debtor, led the Tribunal to conclude that a genuine dispute existed. Consequently, the conditions for admitting the application under Section 9 of IBC, 2016 were not met, resulting in the dismissal of the application.

Conclusion
The Tribunal dismissed the application under CP(IB) No. 504/KB/2018, citing the presence of genuine disputes between the parties. The order was issued without costs, and certified copies were to be provided to all concerned parties upon request and compliance with formalities.