2021 (8) TMI 447 - SC - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - existence of dispute or not - service of demand notice - Corporate Debtor failed to make repayment of its dispute - Operational Creditors or not - amount receivable by Overseas from Kay Bouvet in respect of the provisions of goods or services, including employment or a debt in respect of the payment of dues and as such or not - tripartite agreement - HELD THAT - Once the Operational Creditor has filed an application which is otherwise complete, the adjudicating authority has to reject the application under Section 9(5)(ii)(d) of IBC, if a notice has been received by Operational Creditor or if there is a record of dispute in the information utility. What is required is that the notice by the Corporate Debtor must bring to the notice of Operational Creditor the existence of a dispute or the fact that a suit or arbitration proceedings relating to a dispute is pending between the parties. All that the adjudicating authority is required 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. It is important to separate the grain from the chaff and to reject a spurious defence which is a mere bluster. It is abundantly clear that the case of Kay Bouvet that the amount of ₹ 47,12,10,000/which was paid to it by Overseas, was paid on behalf of Mashkour from the funds released to Overseas by Exim Bank on behalf of Mashkour, cannot be said to be a dispute which is spurious, illusory or not supported by the evidence placed on record. The material placed on record amply clarifies that the initial payment which was made to Kay Bouvet as a subContractor by Overseas who was a Contractor, was made on behalf of Mashkour and from the funds received by Overseas from Mashkour - On the contrary, the documents clarify that the termination of the contract with Overseas would not absolve Overseas of any liability for the balance of the LoC 1st tranche of 25 Million disbursed to them other than USD 10.62 paid to Kay Bouvet. NCLT had rightly rejected the application of Overseas after finding that there existed a dispute between Kay Bouvet and Overseas and as such, an order under Section 9 of the IBC would not have been passed. We find that NCLAT has patently misinterpreted the factual as well as legal position and erred in reversing the order of NCLT and directing admission of Section 9 petition. The impugned order dated 21st December 2018, passed by NCLAT is quashed and set aside - Appeal is allowed.

Summary

Issues Involved:
1. Whether the claim made by the respondent constitutes an "Operational Debt" under the Insolvency and Bankruptcy Code (IBC).
2. Whether the respondent qualifies as an "Operational Creditor" under the IBC.
3. Whether there exists a dispute regarding the debt claimed by the respondent.

Issue-wise Detailed Analysis:

1. Whether the claim made by the respondent constitutes an "Operational Debt" under the Insolvency and Bankruptcy Code (IBC):

The appellant argued that the claim made by the respondent does not qualify as an "Operational Debt" as defined under subsection (21) of Section 5 of the IBC. The appellant contended that no amount is receivable by the respondent from the appellant in respect of the provisions of goods or services, including employment or a debt in respect of the payment of dues. This argument was based on the premise that the payment made to the appellant by the respondent was from the amount received by the respondent from Mashkour Sugar Company Limited (Mashkour). The respondent, on the other hand, asserted that the amount paid to the appellant was from its own funds and not from Mashkour, and thus, the claim falls under the definition of "Operational Debt."

2. Whether the respondent qualifies as an "Operational Creditor" under the IBC:

The appellant contended that the respondent does not qualify as an "Operational Creditor" under the IBC, as the claim made does not fit within the definition provided under the IBC. The respondent, however, argued that since the appellant admitted to receiving the amount from the respondent, the respondent qualifies as an "Operational Creditor" and is entitled to file proceedings under Section 9 of the IBC. The court did not find it necessary to delve deeply into this issue as the appeal could be decided on the ground of the existence of a dispute.

3. Whether there exists a dispute regarding the debt claimed by the respondent:

The court examined whether there was an "existence of dispute" as per the provisions of Sections 8 and 9 of the IBC. The appellant had clearly stated that the amount of ?47,12,10,000 received was an advance payment on behalf of Mashkour and was to be adjusted against supplies to be made to Mashkour under a new agreement. The court referred to various communications and agreements, including Clause 14.1 of the Tripartite Agreement, which indicated that the payment was made by Mashkour to the respondent, who then paid the appellant. The court found that the appellant's claim of the existence of a dispute was not spurious, illusory, or unsupported by evidence. The court noted that the material on record showed that the amount was indeed paid on behalf of Mashkour and was to be adjusted against future supplies.

Conclusion:

The court concluded that the National Company Law Tribunal (NCLT) had rightly rejected the respondent's application under Section 9 of the IBC, finding that there existed a dispute between the appellant and the respondent. The National Company Law Appellate Tribunal (NCLAT) had misinterpreted the factual and legal positions and erred in reversing the NCLT's order and directing the admission of the Section 9 petition. Thus, the appeal was allowed, and the NCLAT's order dated 21st December 2018 was quashed and set aside, maintaining the NCLT's order dated 26th July 2018.