2023 (8) TMI 320 - AT - Insolvency and Bankruptcy

Application hit by Section 10A of IBC - Barter Transactions - dues claimed are prior to 25/03/2020 and interest has been calculated from that date and the date of default written in Section 9 Application is 22/02/2020 and the calculation of interest is from 01/04/2020 - existence of pre-existing dispute or not - HELD THAT - From the Invoice, it is clear that it is agreed between the Parties that interest would be charged at 24 % p.a., if payment is not received within 30 days from the Invoice date. Likewise, a bare reading of the aforenoted Invoice shows the interest component to be 24 % p.a. with a default clause that if the amount is not paid within 30 days from the Invoice date, interest will be attracted. Therefore, the contention of the Learned Senior Counsel that the calculation ought to be based on 11 days to 42 days, is untenable. The total amount for maintainability of Claim will include both Principal Debt amount as well as the Interest on the delayed payment which is stipulated in the Invoice dues. In the instant case, the Principal amount is said to be Rs. 1,65,60,017/- and the interest portion at 24 % as per the second Clause in Invoice No. 2 is Rs. 56,31,027/-. Therefore, this Tribunal is of the considered view that the amount has crossed the threshold of Rs. 1,00,00,000/- and also that the amounts due and payable are for a period prior to 25/03/2020. The date of default mentioned in the Section 9 Application is 22/02/2020. Therefore, it is clear that for any amounts due and payable prior to 25/03/2020, Section 10A cannot be made applicable. Pre existing dispute between the Parties as there was a Barter Transaction and when the Respondent / Operational Creditor had initiated Arbitration Proceedings under the MSME Council - HELD THAT - It is seen from the record that the MSME Council has rejected the Application and there is no Claims / Suit pending in any Court of Law before any Tribunal and there is no Arbitration Proceeding pending prior to the initiation of the Section 8 Notice. Additionally, the Appellant had stated in Para 8 of their Counter, that a payment of Rs. 40,000/- was made on 10/08/2021, 09/09/2021, 12/10/2021 22/03/2022 which further establishes that some amounts were paid even subsequent to the filing of the Application before the MSME Council - Additionally, the Appellant had stated in Para 8 of their Counter, that a payment of Rs. 40,000/- was made on 10/08/2021, 09/09/2021, 12/10/2021 22/03/2022 which further establishes that some amounts were paid even subsequent to the filing of the Application before the MSME Council. The Hon ble Apex Court in the matter of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd reported in 2017 (9) TMI 1270 - SUPREME COURT has addressed to the question of pre existing dispute and observed So long as dispute truly exists in fact and is not spurious, hypothetical, or illusory, the Adjudicating Authority has to reject the application. This Tribunal is of the considered view that the ratio of the aforenoted Judgment is squarely applicable to the facts of this case as this Tribunal is of the considered view that the Dispute raised is a spurious one and is an illusory one. Additionally, it is significant to mention that before the very same MSME Council , the Appellant / Corporate Debtor in his Reply, in Paras 4 and 5 (Reply to MSME Annexure A4) has clearly admitted that the reason for delay of settlement of outstanding amounts is not wanton and that Company is making all sorts of efforts to settle the outstanding dues as soon as possible . Appeal dismissed.

Summary

Issues Involved:

1. Whether the application is hit by Section 10A of the Insolvency and Bankruptcy Code (IBC).
2. Whether there is a pre-existing dispute between the parties.
3. Whether the claim includes both principal debt and interest on delayed payment.

Summary:

Issue 1: Application under Section 10A of IBC

The Tribunal examined whether the application is barred by Section 10A of the Code. The invoices in question had due dates prior to 25/03/2020, and the date of default mentioned in the Section 9 Application was 22/02/2020. The Tribunal concluded that Section 10A cannot be applied as the amounts due and payable were for a period prior to 25/03/2020. Therefore, the application was not hit by Section 10A.

Issue 2: Pre-existing Dispute

The Tribunal addressed the issue of a pre-existing dispute, noting that the MSME Council had dismissed the application for arbitration, observing that the nature of the transactions required voluminous evidence unsuitable for summary proceedings. The Tribunal found no pending claims, suits, or arbitration proceedings before the initiation of the Section 8 Notice. Additionally, the Appellant had made payments even after filing the application before the MSME Council, further establishing the absence of a pre-existing dispute. The Tribunal referred to the Supreme Court's judgment in 'Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd,' which emphasized that only genuine disputes should be considered, and found the dispute raised by the Appellant to be spurious and illusory.

Issue 3: Claim Including Principal Debt and Interest

The Tribunal noted that the total amount for the maintainability of the claim includes both the principal debt and the interest on delayed payment as stipulated in the invoices. The principal amount was Rs. 1,65,60,017/- and the interest at 24% per annum amounted to Rs. 56,31,027/-. The Tribunal held that the total amount exceeded the threshold of Rs. 1,00,00,000/-, making the application maintainable. The Tribunal cited the NCLAT Principle Bench's decision in 'Mr. Prashat Agarwal Vs. Vikash Parasrampuria & Anr.' to support its conclusion.

Conclusion

The Tribunal dismissed the appeal, finding no illegality or infirmity in the impugned order dated 31/03/2023, and confirmed that the amounts were due and payable prior to 25/03/2020 with no pre-existing dispute. The appeal was dismissed with no costs, and any connected pending interlocutory applications were closed.