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2021 (2) TMI 875 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors or not - existence of is debt and dispute or not - HELD THAT - On a careful perusal of the documents it is noticed that there were two work orders given to the Operational Creditor by the Corporate Debtor as sub-contract, i.e. HVAC works was given by way of Work Order MMC/COGS/378 dated 17.10.2018 for a total consideration of ₹ 7,62,71,187 and electrification work for the same project was also given to the Operational Creditor by way of Work Order MMC/CO/GS/379 dated 26.10.2018 for a total consideration of ₹ 5,53,50,852. It appears from the record that the time period for completion for work was for a period of 11 months i.e. from 01.01.2019 to 30.11.2019. The Corporate Debtor also admit that the work order was provided to the Operational Creditor - It is reiterated that testing. commissioning. providing guarantee/warranty cards arise only at the final stage when handing over is done. The reliance on clause 46 of the work order is also blatantly Wrong as same comes into effect only at the final stage of testing, commissioning and handing over. It in denied that the Operational Creditor did not supply materials of the approved make and that defective materials were supplied. It is nothing more than an unsubstantiated contention taken after receiving the entire amount from the principal contractor. In respect of the definition of dispute , the law is now very much settled by several courts, most importantly the decision of the Hon ble Supreme Court in Mobilox (supra) in which it is clearly observed that the Adjudicating Authority is to examine at the stage of admission whether there is a plausible contention which requires further investigation and on assertion of fact a dispute is supported by evidence. The expression used in Section 8(2) of the Insolvency Bankruptcy Code existence of a dispute, if any is very significant, because the Legislature is deemed not to waste its words or to say anything in vain, hence every word is significant - A view has also been expressed that the definition of dispute as per Section 5 of Insolvency Bankruptcy Code is illustrative and not exhaustive. It is held that a dispute must not be spurious, hypothetical or illusory, quoted verbatim So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application . This Tribunal is also expected to see whether there is a plausible contention of dispute and not a feeble argument. Therefore, all that this Tribunal is to see at this stage is whether there is a plausible contention which requires further investigation and that the dispute is not a patently feeble legal argument or an assertion of fact unsupported by evidence. Finally, a conclusion is hereby drawn that this is not a case where the impugned Debt and the alleged default was free from existence of plausible dispute or merely a feeble argument; but duly supported by corroborative evidences. Therefore, it cannot be proceeded under the Insolvency Code so as to commence CIRP by declaring the Debtor insolvent or bankrupt. It is worth to put on record that the scope and jurisdiction of this Tribunal is limited and also confined to the provisions of Insolvency Code while dealing with application filed under Section 9. Therefore, the impugned debt in question does not fall within those ambits. However, the claim under any other law, if permissible, can be pursued by the applicant as prescribed under that law. Any observation, legal or factual, shall not prejudice the rights of the applicant, if to be exercised under any other law. Application dismissed.
Issues Involved:
1. Jurisdiction of the Tribunal 2. Existence of debt and default 3. Quality and completion of work by the Operational Creditor 4. Pre-existing dispute 5. Applicability of the Insolvency and Bankruptcy Code (IBC) Issue-wise Analysis: 1. Jurisdiction of the Tribunal: The Tribunal confirmed its jurisdiction to handle the application as the Corporate Debtor is registered in Ernakulam, Kerala, and the application was filed under Section 9 of the Insolvency & Bankruptcy Code, 2016, read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. 2. Existence of Debt and Default: The Operational Creditor claimed a total outstanding amount of ?2,26,30,208 as principal and ?4,07,093 as interest. The Corporate Debtor subcontracted HVAC and Electrification work to the Operational Creditor, who raised invoices periodically. The Corporate Debtor admitted to certain payments but disputed the total amount claimed, citing statutory deductions and retention amounts. 3. Quality and Completion of Work by the Operational Creditor: The Corporate Debtor raised issues regarding the quality of the materials supplied and the completion of work. They argued that the Operational Creditor did not supply materials as per the BOQ specifications and failed to rectify defects. The Operational Creditor countered that testing, commissioning, and providing guarantee/warranty cards arise only at the final stage of handing over. 4. Pre-existing Dispute: The Tribunal found that there was a pre-existing dispute between the parties regarding the quality of work and materials supplied. This dispute was evident from the email communications and correspondences produced, which showed issues raised by the Corporate Debtor much prior to the demand notice. 5. Applicability of the Insolvency and Bankruptcy Code (IBC): The Tribunal referred to the Hon'ble Supreme Court's decision in Mobilox Innovations Private Limited v. Kirusa Software Private Limited, which mandates that an application under Section 9 must be rejected if there is a record of dispute. The Tribunal concluded that the dispute was not spurious, hypothetical, or illusory but required further investigation. Therefore, the application could not proceed under the IBC to commence CIRP. Conclusion: The Tribunal dismissed the application, stating that the impugned debt and alleged default were not free from the existence of a plausible dispute. The Tribunal's jurisdiction is limited to the provisions of the Insolvency Code, and the claim could be pursued under any other applicable law. The application IBA/18/KOB/2020 was dismissed with no order as to costs. Dated the 25th day of September, 2020.
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