2021 (6) TMI 626 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - debtor-creditor relationship between Operational Creditor and Corporate Debto or not - pre-existing dispute or not - HELD THAT - Based on the 'MOU', the dues receivable to Operational Creditor 'Sew-Prasad JV' have been transferred/assigned to the 1st Party, i.e. Sew Infrastructure Ltd (in short 'SIL') w.e.f. 20 May 2016. Therefore the question of maintainability of the Petition by Operational Creditor' 'SPJV' arises. Based on the assignment of debt to SEW Infrastructure Ltd, 'SPJV' does not remain an Operational Creditor of the Corporate Debtor 'GIPL' - it is clear that there was no debtor-creditor relationship between Operational Creditor 'SPJV' and the Corporate Debtor' GIPL' on the date of filing of the Petition, i.e. on 21 September 2017 under Section 9 of the I B Code, 2016. Pre-existing dispute or not - HELD THAT - Undisputedly AJVPL failed to make the payment as per the terms of MOU. Accordingly, consequences of the breach of the terms of MOU dated 14 December 2013 and further violation of the terms of MOU dated 20 May 2016 cannot be determined in a summary jurisdiction given to the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 - Before the issuance of the demand notice, several correspondences are showing the existence of a dispute between the parties. The alleged claim regarding the liability of the Corporate Debtor to pay ₹ 2.03 crores to Respondent No.1 SPJV was subject to the completion of work to the satisfaction of the Corporate Debtor GIPL. In response to the letter of the Operational Creditor dated 12 July 2014 for releasing the amount of ₹ 2.03 crores, the Corporate Debtor intimated that the payment against the withhold amount could be made after the completion of work. It was suggested by the Corporate Debtor to speed up the pace of the work and complete their pending assignments at the site. The Operational Creditor, in its letter dated 23 January 2015, wrote to the corporate debtor for releasing Rs. two crores, which were withheld against their pending works. In this letter, the Operational Creditor contended that it has already completed almost all the pending works except the shifting of equipment and machinery. Therefore the request was made to at least release rupees one crore from the pending dues - the Appellant has proved a pre-existing dispute prior to issuance of the demand notice under Section 8 of the Insolvency and Bankruptcy Code 2016. In the instant case, the claim under the Settlement Agreement, falls within the ambit of the term 'dispute' about the existence of debt . The alleged claims regarding the Corporate Debtor's liability to pay ₹ 2.03 crores to the Operational Creditor was subject to the completion of work to the satisfaction of the Corporate Debtor. The Operational Creditor relied on the merits certificate to show the completion of work to the satisfaction of the Corporate Debtor - The dues receivable by the 'SEW and Prasad JV' is assigned to SEW Infrastructure Ltd. However, the Operational Creditor claims that given the MOU dated 20 May 2016, Rs. eight crores was paid to Intercontinental Infrastructure Ltd by AJVPL. But AJVPL failed to pay the said amount of Rs. eight crores; the MOU has been terminated. There is no debtor-creditor relationship between the Operational Creditor 'SPJV' and the Corporate Debtor 'GIPL'. Therefore, the Petition filed U/S Sec 9 is not maintainable on this ground - Appeal allowed.

Summary

Issues Involved:
1. Pre-existing dispute
2. Debtor-creditor relationship between the Corporate Debtor and Operational Creditor
3. Maintainability of the Petition against the Corporate Debtor, Gati Infrastructure Private Limited (GIPL)

Detailed Analysis:

1. Pre-existing Dispute:
The Appellant contends that the Petition under Section 9 of the Insolvency and Bankruptcy Code (IBC) is not maintainable due to a pre-existing dispute. The Corporate Debtor and Respondent No. 1 had entered into an Agreement on 12 August 2006 for various civil and hydro-mechanical works. Disputes arose over the execution of this Agreement, including delays and defects in the project, which led to a Settlement Agreement on 14 December 2013. This Agreement stipulated that upon payment of Rs. 10 crores, GIPL would have no further liability. However, AJVPL paid only Rs. 4,38,62,122 to SPJV, and the remaining amount was not paid, leading to the Section 9 petition. The Corporate Debtor issued a notice on 10 August 2017 invoking Arbitration for the delays and losses suffered, indicating a pre-existing dispute. The Hon’ble Supreme Court in Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd. clarified that the Adjudicating Authority must reject the Application if there is a plausible contention requiring further investigation. The Appellant has proven a pre-existing dispute before the issuance of the demand notice under Section 8 of the IBC.

2. Debtor-Creditor Relationship:
The Appellant argues that the Settlement Agreement dated 14 December 2013 limited the Corporate Debtor’s liability to Rs. 10 crores, which was paid on 24 December 2013. Clause 2.3 of the Settlement Agreement explicitly states that upon payment of Rs. 10 crores, GIPL would have no further liability. Clause 2.7 prevents SPJV from taking any legal action against GIPL once the payment obligations were fulfilled. Therefore, there was no debtor-creditor relationship between GIPL and SPJV as of the date of filing the Petition. Additionally, the debt owed to SPJV was assigned to Sew Infrastructure Ltd. (SIL) based on an MOU dated 20 May 2016, which further questions the maintainability of the Petition by SPJV.

3. Maintainability of the Petition:
The Petition’s maintainability is questioned due to the assignment of debt to SIL and the pre-existing dispute. The MOU dated 20 May 2016 involved multiple parties, including AJVPL, SIL, and Intercontinental Infrastructure Ltd., and stipulated that AJVPL would clear the dues of SPJV. However, AJVPL failed to make the payment, leading to the termination of the MOU. The Operational Creditor’s reliance on email communications and the merit certificate issued for PQ purposes does not establish a debtor-creditor relationship with GIPL. The existence of a dispute and the assignment of debt to SIL make the Petition under Section 9 of the IBC untenable.

Conclusion:
Based on the above analysis, the Appeal is allowed, and the impugned order of admission of the Petition filed under Section 9 of the IBC is set aside. The pre-existing dispute and the lack of a debtor-creditor relationship between SPJV and GIPL render the Petition not maintainable.