2021 (10) TMI 1077 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Pre-existing dispute between the parties or not - HELD THAT - The burden of proof lies on the Corporate Debtor to establish the pre-existence of dispute before this tribunal. As rightly pointed out by the counsel appearing for the Operational Creditor, in the minutes of the meeting dated 16.08.2016 which was annexed at page No. 117 it was clearly mentioned that the Corporate Debtor has assured to clear the outstanding amount of ₹ 46.5 Lacs as full and final settlement in three equal instalments that too by end of September 2016 - The subsequent email also clearly proves that the Corporate Debtor has assured clearance of the pending dues of the Operational Creditor which was withheld by the Corporate Debtor due to some technical quarries raised by their Higher Officers. This bench has no hesitation in holding that the Corporate Debtor has miserably failed to prove and demonstrate the existence of any pre-existing disputes between the parties and no presumption of pre-existence of disputes can be inferred from the reply filed by the Corporate Debtor in the present company petition. Unless this tribunal after applying its mind comes to the conclusion that the plea of pre-existence of disputes raised by the Corporate Debtor is not a palpable defence and requires some investigation, the plea of pre-existence cannot be accepted. The contention of the respondent that the emails relied upon by the Operational Creditor strengthens the existence of disputes is not legally sustainable as no such presumption of disputes can be inferred from the emails. This bench is of the considered opinion that there is an Operational Debt due and payable, by Corporate Debtor and the Corporate Debtor has committed default in paying the same. When once these two legal requirements are established, this bench has no option except to admit the above petition filed U/sec. 9 of the Insolvency and Bankruptcy Code, 2016. Petition admitted - moratorium declared.

Summary

Issues:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.
2. Existence of a pre-existing dispute between the parties.

Issue 1: Initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor

The Company Petition was filed by the Operational Creditor seeking to trigger the CIRP against the Corporate Debtor under Section 9 of the Insolvency and Bankruptcy Code. The Operational Creditor had completed the work as per the agreement but the Corporate Debtor failed to clear the dues, leading to the petition. The Corporate Debtor denied the claims, arguing that the Operational Creditor misrepresented facts and did not provide proof for the alleged claims. The Corporate Debtor also contended that the Operational Creditor was not legally an Operational Creditor, seeking dismissal of the application on this ground. However, the Tribunal found that the Corporate Debtor failed to establish the existence of a pre-existing dispute, leading to the admission of the petition. The Tribunal ordered the initiation of CIRP against the Corporate Debtor and appointed an Interim Resolution Professional (IRP) to oversee the process.

Issue 2: Existence of a pre-existing dispute between the parties

The key issue revolved around whether there was a pre-existing dispute between the parties. The Operational Creditor had issued a demand notice to the Corporate Debtor, who responded beyond the statutory time limit, reserving the right to reply later. The Corporate Debtor did not provide any further response. The Operational Creditor presented emails as evidence to show that the Corporate Debtor had acknowledged the liability. The Corporate Debtor's reply did not address the lack of response to the demand notice. The Tribunal noted that the burden of proof lay with the Corporate Debtor to establish the pre-existence of a dispute. The Tribunal found that the Corporate Debtor had failed to prove the existence of any pre-existing disputes and ruled in favor of the Operational Creditor. The Tribunal emphasized that unless there was a palpable defense requiring investigation, the plea of pre-existing disputes could not be accepted. Consequently, the Tribunal admitted the Company Petition and ordered the initiation of CIRP against the Corporate Debtor.

In conclusion, the Tribunal's judgment focused on the lack of proof of a pre-existing dispute by the Corporate Debtor, leading to the admission of the Company Petition and the initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor. The detailed analysis highlighted the legal requirements, evidentiary considerations, and the Tribunal's reasoning behind the decision, ensuring a comprehensive understanding of the judgment.