2024 (10) TMI 398 - AT - IBC

Dismissal of Company Petition on the ground of pre-existing disputes - seeking initiation of CIRP - claim did not meet the threshold of Rs. 1 crore - whether a pre-existing dispute existed between the parties at the time of filing the Section 9 Petition, which would bar the initiation of Corporate Insolvency Resolution Process (CIRP) under the Code? - HELD THAT - The Respondent has provided documentary evidence, including communications and police complaints, that demonstrated ongoing disputes related to the possession of the leased premises and the payment obligations under the lease - The Adjudicating Authority rightly considered these disputes as substantial and pre-existing, thereby rendering the Section 9 Petition non- maintainable under the Code. It is a well-settled principle that the existence of a pre-existing dispute, regardless of its merit, disqualifies an Operational Creditor from initiating CIRP under Section 9 of the Code. Upon careful examination of the materials on record and submissions, it is evident that there was indeed a pre-existing dispute between the Appellant (Operational Creditor) and the Respondent (Corporate Debtor) regarding the lease agreement and the outstanding dues. The Respondent provided documentary evidence, including communications and police complaints before the Adjudicating Authority that demonstrated ongoing disputes related to possession of the leased premises and the payment obligations under the lease. Since it is a clear case of pre-existing dispute and the Appeal can be dismissed on this ground alone, therefore we are not looking into other issues in this Petition. But without going into the merit of each of them, they are just noted for record as like it could fail on the ground of not meeting the threshold of Rs. 1 crore as prescribed under Section 4 of the Code. Also likely to fail on the grounds that there are discrepancies in the amounts claimed by the Appellant, which when adjusted for prior payments, advance rent, and security deposits, could fall short of the requisite threshold. There are also claims of fabrication of invoices etc. The Appellant has failed to demonstrate that the Adjudicating Authority erred in its decision to dismiss the Section 9 Petition - Appeal dismissed.

Issues Involved:

1. Pre-existing dispute between the parties.
2. Threshold limit of the operational debt.
3. Validity of the invoices and GST compliance.
4. Possession of the leased premises and related obligations.

Issue-wise Detailed Analysis:

1. Pre-existing Dispute Between the Parties:

The core issue addressed by the Appellate Tribunal was whether a pre-existing dispute existed between the parties at the time of filing the Section 9 Petition, which would bar the initiation of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. The Tribunal found that disputes existed long before the Section 8 demand notice was issued on 10.06.2021. The Operational Creditor had acknowledged in a letter dated 27.10.2020 that the Corporate Debtor had offered to vacate the premises, but insisted on a 3-month advance notice as per the lease deed. The Corporate Debtor had also communicated multiple times about vacating the premises, which was substantiated by police complaints and other communications. The Tribunal concluded that these disputes were substantial and pre-existing, rendering the Section 9 Petition non-maintainable under the Code. This aligns with the precedent set in Mobilox Innovations Pvt Ltd vs Kirusa Software Pvt Ltd, where it was held that a pre-existing dispute disqualifies an Operational Creditor from initiating CIRP.

2. Threshold Limit of the Operational Debt:

The Appellant's claim was challenged on the grounds that it did not meet the threshold of Rs. 1 crore as prescribed under Section 4 of the Code. The Tribunal noted that there were discrepancies in the amounts claimed by the Appellant, which, when adjusted for prior payments, advance rent, and security deposits, could potentially fall short of the requisite threshold. The Corporate Debtor argued that the Appellant had fabricated invoices to meet the threshold, and the Tribunal found merit in this argument, further supporting the dismissal of the Petition.

3. Validity of the Invoices and GST Compliance:

The validity of the invoices and GST compliance was another critical issue. The Corporate Debtor provided evidence that the GST numbers of the Operational Creditor were cancelled due to default in return filing, and the invoices submitted were found to be forged. The Tribunal considered the letter from the GST authorities, which confirmed that the GST invoices were non-est in the eyes of law, as no GST had been paid following the cancellation of the GST registration. This lack of GST compliance further weakened the Appellant's case.

4. Possession of the Leased Premises and Related Obligations:

The Tribunal addressed the issue of possession of the leased premises and related obligations. The Corporate Debtor had offered possession of the premises as early as 01.08.2020, but the Appellant continued to claim rent up to 24.08.2021. The Tribunal found that the liability for rent ceased upon the offer of possession, and any subsequent claim for rent was untenable. The actual physical possession was handed over on 24.08.2021, as confirmed by a compromise letter before the police authorities. The Tribunal upheld the Adjudicating Authority's interpretation that the rent claim beyond the offer of possession was flawed.

Conclusion:

The Tribunal concluded that the Appeal lacked merit, as the Appellant failed to demonstrate any error in the Adjudicating Authority's decision to dismiss the Section 9 Petition. The existence of a pre-existing dispute, failure to meet the threshold limit, invalid invoices, and the issue of possession all contributed to the dismissal of the Appeal.

Order:

The Appeal was dismissed, and the Impugned Order of the National Company Law Tribunal, Chandigarh Bench, dated 01.03.2024, was upheld. The Appellant was directed to bear the costs of the Appeal.

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