2022 (2) TMI 963 - 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 - It is seen that Operational Creditor has issued notice under section 8 of the Code on 6.5.2019 and the said notice has been duly replied by Corporate Debtor on 15.5.2019, and the present Application has been filed on 18.10.2019. While replying to the said notice, Corporate Debtor has referred to its earlier mail dated 22.2.2019 wherein certain quality issues/deficiencies on part of the Operational Creditor have been highlighted. Relying upon the said e-mail dated 22.2.2019, the Corporate Debtor has denied its liability towards Operational Creditor. The Corporate Debtor has further stated that it has duly paid an amount of ₹ 46,05,375/- (being Base Value including Tax (GST) subject to TDS) and settled various invoices raised by the Operational Creditor - from the analysis it is convincing that Corporate Debtor has been able to establish existence of preexisting dispute between it and the Operational Creditor. The present Application filed under section 9 of the Code by Operational Creditor seeking initiation of Corporate Insolvency Resolution Proceedings against the Corporate Debtor is hereby dismissed.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency & Bankruptcy Code, 2016 based on a debt claim by the Operational Creditor against the Corporate Debtor.

Analysis:
1. The Operational Creditor sought to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for unpaid invoices totaling ?94,95,375. The Operational Creditor claimed that the services provided were acknowledged, and partial payments were made by the Corporate Debtor.

2. The Corporate Debtor contested the petition, citing a pre-existing dispute regarding the quality of services provided. The Corporate Debtor highlighted deficiencies in the services, termination of the contract, and subsequent engagement of another vendor due to quality issues, resulting in financial losses.

3. Both parties presented written submissions and relied on case laws to support their arguments. The Operational Creditor emphasized the undisputed nature of the debt and previous correspondence acknowledging the liability, while the Corporate Debtor asserted that the quality issues raised constituted a valid dispute.

4. The Tribunal analyzed the evidence, including emails exchanged between the parties, to determine the existence of a pre-existing dispute. The Tribunal noted that the Corporate Debtor had raised quality concerns before the Operational Creditor issued the notice under Section 8 of the Code, indicating a dispute prior to the initiation of insolvency proceedings.

5. Referring to Section 9(5) of the I&B Code, the Tribunal concluded that the Corporate Debtor had successfully demonstrated the existence of a pre-existing dispute, leading to the dismissal of the Operational Creditor's application for CIRP initiation against the Corporate Debtor.

6. The Tribunal ruled in favor of the Corporate Debtor, dismissing the application and emphasizing the lack of merit in the Operational Creditor's claim. No costs were awarded in the judgment.

This detailed analysis of the judgment highlights the key arguments, evidence presented, legal principles applied, and the final decision reached by the Tribunal in the matter of initiating Corporate Insolvency Resolution Process under Section 9 of the Insolvency & Bankruptcy Code, 2016.