2021 (10) TMI 299 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Debtor-Creditor relationship between the Corporate Debtor and the Operational Creditor - Whether the claim of ₹ 33.98 Crores is an Operational Debt legally recoverable from GIPL? - HELD THAT - In the Application under Section 9 of the IBC for the amount i.e. ₹ 33.98 Crores in which, admittedly ₹ 10 Crores has been paid by the GIPL and the remaining amount is to be paid by AJVPL and in case they failed to pay the amount, the Operational Creditor (SPJV) can recover the amount from AJVPL and the guarantors i.e. MIAPL and MK. However, the SPJV cannot recover any amount under the agreement dated 14.12.2013 from the GIPL - for the purpose of this amount, there is no relationship between them as Operational Creditor (SPJV) and Corporate Debtor (GIPL). Whether the claim of ₹ 2.03 Crores is an Operational Debt legally recoverable from GIPL? - HELD THAT - SPJV has not completed the work to the satisfaction of GIPL and therefore, they have withheld ₹ 2.03 Crores and subsequently, released ₹ 5 Lacs and no completion certificate was issued in favour of SPJV - there is a pre-existing dispute between the parties, therefore, Section 9 Application is not maintainable. Hon ble Supreme Court in the case of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED 2017 (9) TMI 1270 - SUPREME COURT has held that the Adjudicating Authority is to see at the time of admitting or rejecting the Application whether there is plausible contention which requires further investigation and that the dispute is not patently feeble legal argument or an assertion of fact unsupported by evidence. Therefore, so long dispute exist in fact and it is not spurious hypothetical or imaginary, Adjudicating Authority has to reject the Application. Moreover, the existence of dispute must be pre-existing i.e. it must exit before the receipt of demand notice or invoice. In the present case, there is a pre-existing dispute, therefore, the Application under Section 9 of the IBC is liable to be dismissed. However, Ld. Adjudicating Authority has admitted the Application and initiated CIRP without considering the documents. 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

Issue-wise Detailed Analysis:

Issue 1: Pre-existing dispute
The Hon'ble Technical Member identified a pre-existing dispute regarding the claim of ?2.03 Crores. The Corporate Debtor (GIPL) argued that this amount was withheld due to incomplete work by the Operational Creditor (SPJV). Correspondence between the parties revealed that the work was not completed to GIPL's satisfaction, and thus, the amount was withheld. The SPJV's request for a certificate of merit was for submission to other clients, not an acknowledgment of work completion. The Hon'ble Member concluded that there was a genuine pre-existing dispute, making the Section 9 application under the IBC not maintainable.

Issue 2: Debtor-Creditor relationship between the Corporate Debtor and Operational Creditor
The Hon'ble Technical Member examined the agreement dated 14.12.2013, which stipulated that GIPL was to pay ?10 Crores to SPJV, and the remaining ?23.98 Crores was to be paid by AJVPL in instalments. GIPL fulfilled its obligation by paying ?10 Crores, and SPJV agreed not to claim any further amount from GIPL. The remaining amount was to be recovered from AJVPL and guarantors MIAPL and MK. Therefore, the relationship of debtor and creditor did not exist between GIPL and SPJV for the remaining amount, negating the maintainability of the claim under Section 9 of the IBC.

Issue 3: Maintainability of the Petition against the Corporate Debtor
The Hon'ble Technical Member held that the petition under Section 9 of the IBC was not maintainable due to the absence of a debtor-creditor relationship and the existence of a pre-existing dispute. The Hon'ble Judicial Member, however, dismissed the appeal, finding no legal flaws in the impugned order. The Third Member, upon reviewing the divergent judgments and the merits, aligned with the Hon'ble Technical Member's view, emphasizing that the appeal deserved to be allowed.

Conclusion:
The Hon'ble Third Member concluded that the appeal should be allowed, and the application under Section 9 of the IBC should be dismissed due to the pre-existing dispute and the absence of a debtor-creditor relationship between GIPL and SPJV for the claimed amounts. This opinion was to be placed before the Division Bench for final orders regarding the disposal of the appeal.