2022 (6) TMI 492 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Penalty/liquidated damages levied by Corporate Debtor or not - HELD THAT - Considering the documents on record admittedly the respondent has never raise any dispute over quantum of claim or delay of applicant. The corporate debtor has failed to place any document on record to show that said imposition of penalty was ever communicated to the applicant before issuance of demand notice. No debit note in this regard was ever issued by respondent. The communications relied upon by respondent are related to period 2016-17, only in respect of delay in completion of project. No penalty or liquidated damages were levied by corporate debtor - Admittedly, in terms of agreement the corporate debtor is not entitle to impose any penalty to the applicant. The respondent even reconciled the accounts of applicant and failed to raise any dispute over claim of applicant during reconciliation. It is not the case of respondent that work order was never completed by applicant. The respondent has already made payments to applicant which shows that there is no defect in performance of contract other than delay in completion, that too a penalty of Rs. 14 lakhs was already levied by SCEI on applicant. This leaves no doubt that the default has occurred for the payment of the operational debt to the applicant and the so called dispute raised by the corporate debtor is merely a moonshine dispute as laid down by Hon'ble Supreme Court in the matter of Mobilox Innovative Private Limited vs. Kirusa Software Private Limited. 2017 (9) TMI 1270 - SUPREME COURT Thus, it can be concluded that the applicant has established its claim which is due and payable by the corporate debtor and the corporate debtor has failed to prove existence of any preexisting dispute in respect of amount claimed by applicant - application admitted - moratorium declared.

Summary

Issues:
Application for initiation of CIRP under Section 9 of IBC 2016 based on alleged default by Corporate Debtor. Dispute over pending debt amount and penalties imposed. Examination of contractual obligations, delay in project completion, penalty clauses, and communication of disputes.

Analysis:

1. Alleged Default and Debt Amount:
The applicant, an operational creditor, filed an application seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, alleging an outstanding balance of Rs. 13,84,254 due to default in payment related to solar rooftop power projects. The contracts between the parties detailed the work orders, technical specifications, payment terms, and completion periods. Notably, the Corporate Debtor failed to release the complete payment, leading to the dispute.

2. Penalties Imposed and Dispute Over Delay:
The Corporate Debtor claimed a dispute over the pending debt amount, alleging a delay of 117 days by the applicant in executing the work orders. The respondent asserted penalties were imposed due to losses suffered as a result of the delay, supported by communications and calculations of losses. However, the applicant denied these allegations, emphasizing the absence of a penalty clause in the agreement and the lack of dispute raised by the Corporate Debtor during reconciliation.

3. Legal Analysis and Decision:
The Tribunal examined the evidence presented by both parties, noting that the Corporate Debtor failed to demonstrate communication of penalties before the demand notice was issued. The absence of a penalty provision in the agreement was highlighted, along with the reconciliation of accounts without dispute over the claim. Referring to the Indian Contract Act, the Tribunal emphasized that the Corporate Debtor could not claim compensation for losses if the work order was completed, as payments were made to the applicant despite the delay.

4. Appointment of Insolvency Resolution Professional (IRP):
The Tribunal appointed Mr. Amit Talwar as the Insolvency Resolution Professional for the Corporate Debtor, directing the applicant to deposit a sum for the IRP's expenses. The admission of the application triggered a moratorium period under the IBC, prohibiting certain actions against the Corporate Debtor. Compliance and communication directives were issued to the parties, IRP, and regulatory authorities for record-keeping and updates.

In conclusion, the Tribunal admitted the application, finding in favor of the applicant due to the established debt claim and the failure of the Corporate Debtor to prove a preexisting dispute. The decision highlighted the legal provisions, contractual obligations, and communication requirements in resolving the dispute over the alleged default and penalties imposed.