2023 (9) TMI 1292 - AT - Insolvency and Bankruptcy

Admission of section 9 application - CIRP of Corporate Debtor initiated - it is contended that the Adjudicating Authority had failed to consider that nothing was due or payable by the Corporate Debtor to the Operational Creditor and that there was a pre-existing dispute subsisting between the two parties - HELD THAT - The Adjudicating Authority has rightly observed after perusing the reply filed by the Corporate Debtor to the legal notice of 05.12.2019 as well as their reply to the demand notice dated 02.01.2020 that at no occasion the Corporate Debtor had raised complaints with regard to poor quality of goods with the Operational Creditor after issue of the two credit notes aggregating Rs.35,91,500/-. Neither any invoices have been furnished in support of their contention that the Corporate Debtor had supplied material to the Operational Creditor. There are no communication which has been placed on record by which the Corporate Debtor had sent any reminder to the Operational Creditor in respect of their outstanding payments. It has also been rightly observed that disputes surrounding claims and counter-claims cannot be adjudicated or determined by the Adjudicating Authority given their summary jurisdiction. The Adjudicating Authority in the present case has carefully considered the reply and submissions made by the Corporate Debtor and has correctly come to the conclusion that there is no ground to establish any real and substantial pre-existing dispute which can thwart the admission of section 9 application against the Corporate Debtor - there are no hesitation in observing that in the present case there is no real pre-existing disputes discernible from given facts and all other requisite conditions necessary to trigger CIRP under Section 9 stands fulfilled. The Adjudicating Authority has rightly admitted the application of the Operational Creditor filed under Section 9 of IBC - the impugned order does not warrant any interference - Appeal dismissed.

Summary

Issues Involved:
1. Pre-existing disputes between the parties.
2. Claims and counter-claims regarding the quality of goods supplied.
3. Admission of the Corporate Debtor into CIRP.
4. Intervenor application by Bank of Baroda.
5. Directions to IRP for running the Corporate Debtor as a going concern.
6. Determination and payment of IRP fees and expenses.

Summary of Judgment:

Pre-existing Disputes:
The Appellant contended that the Adjudicating Authority failed to consider pre-existing disputes regarding the poor quality of goods supplied by the Operational Creditor during FY 2015-16 and 2016-17. The Corporate Debtor had issued debit notes and claimed compensation for losses. The Operational Creditor countered that these disputes were a sham defense to evade payment, and the Adjudicating Authority found no real or substantial pre-existing disputes.

Claims and Counter-claims:
The Corporate Debtor claimed that after adjusting for defective supplies and advance payments, nothing was due to the Operational Creditor. The Operational Creditor argued that credit notes amounting to Rs.35,91,500/- had already settled the dispute, and the Corporate Debtor's counter-claims were fabricated. The Adjudicating Authority concluded that disputes regarding claims and counter-claims could not be adjudicated under Section 9 of IBC.

Admission into CIRP:
The Adjudicating Authority admitted the Corporate Debtor into CIRP, finding that the Operational Creditor had established a default in payment of operational debt amounting to Rs.13,42,230/- plus interest. The Tribunal upheld this decision, noting no real pre-existing disputes and fulfillment of conditions to trigger CIRP under Section 9.

Intervenor Application by Bank of Baroda:
Bank of Baroda, as a lead member of a consortium of banks, sought to intervene, claiming an outstanding amount of Rs.37,36,32,233/- from the Corporate Debtor. The Tribunal allowed the intervention, directing the IRP to proceed with CIRP and rejecting any preferential treatment to one creditor.

Directions to IRP:
The Tribunal directed the IRP to run the Corporate Debtor as a going concern with cooperation from ex-management and employees. The IRP was also instructed to address the lack of cooperation from the suspended management and to commence CIRP without further delay.

Determination and Payment of IRP Fees:
The Tribunal disposed of the application for IRP fees, directing the IRP to take up the matter of CIRP costs, including their fees, with the CoC in accordance with law.

Conclusion:
The appeal was dismissed, and the Adjudicating Authority's order was upheld. The Tribunal directed the refund of the amount deposited by the Appellant and allowed Bank of Baroda to pursue their claims with the IRP. All other IAs were disposed of accordingly.