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2024 (11) TMI 672 - AT - IBCAdmission of Section 9 petition against the Corporate Debtor - initiation of Corporate Insolvency Resolution Process - dispute of dues - pre-existing disputes which were wrongly overlooked by the Adjudicating Authority - whether payment to the Operational Creditor was due from the Corporate Debtor giving rise to an operational debt? - whether a default has been committed by the Corporate Debtor in respect of payment of such operational debt having already become due and payable? - whether the said operational debt exceeds the threshold level and is an undisputed debt? HELD THAT - The Operational Creditor has placed material on record which shows that in response to their email dated 17.12.2020 as placed at page 929 of Appeal Paper Book (APB), the Corporate Debtor in their reply email dated 21.12.2020 as placed at page 927 of Appeal Paper Book clearly admitted that they had made total imports of about USD 70 million during the period from 2016 to November 2020 against which they had paid only USD 57 million to the Operational Creditor. It was however contended by the Corporate Debtor that the Adjudicating Authority had not taken cognisance of the fact that the alleged balance confirmation dated 03.03.2021 was issued on the insistence of the Operational Creditor with the limited purpose of disclosure. The Corporate Debtor had admitted the operational debt and held adverse cash-flow to be the cause for non-payment of the operational debt and as such no dispute with the Operational Creditor was attributed for non-payment of the same - The tone and tenor of the email clearly shows that that the Corporate Debtor while admitting the debt had shown their commitment to participate with the Operational Creditor in building their brand presence in India thereby showing that there was no dispute between the parties on the business dealings. The contention of the Corporate Debtor that only part of the debt has been admitted by the Corporate Debtor does not hold ground as long as the admitted debt which has been admitted is clearly above the prescribed threshold limit of Rs 1 cr. The Corporate Debtor has duly admitted the outstanding debt and default which is a valid and proper admission in the eyes of law. In the attendant facts and circumstances, no error was committed by the Adjudicating Authority in admitting the application for initiating CIRP. It is noticed that even at the stage of notice of dispute, the Corporate Debtor has only mentioned about some agreement of 04.10.2016 and subsequent agreement of 01.09.2018 while there is no mention of the agreement of 21.07.2015. It is therefore a misleading statement made by the Corporate Debtor that the agreement of 21.07.2015 finds mention in the Notice of Dispute - In the present case, the Adjudicating Authority went ahead to ignore the disputes between the parties while admitting the Section 9 application. Thus, no material has been placed on record by the Corporate Debtor to show that they had categorically rejected the outstanding dues claimed by the Operational Creditor prior to issue of demand notice. There is no evidence of any outright denial of the liability to pay which has been placed on record by the Corporate Debtor. Furthermore, it is noticed that Corporate Debtor while admitting the outstanding debt had also admitted in the same breath that they were working to promote the global presence of the Operational creditor in India which affirms that there were no differences between them with regard to the agreement basis which they were conducting their business operations - no real preexisting dispute is discernible. There is no good ground to establish any real and substantial pre-existing dispute which can thwart the admission of section 9 application against the Corporate Debtor. The Adjudicating Authority therefore does not appear to have committed any error in holding that all requisite conditions necessary to trigger CIRP under Section 9 stands fulfilled. The Appellant has defaulted in the payment of operational debt which amount had clearly become due and payable above the threshold limit, and further in the absence of any credible or plausible pre-existing dispute, it is found that no error has been committed by the Adjudicating Authority in admitting the application under Section 9 of IBC and initiating CIRP. There are no merit in this Appeal - Appeal is dismissed.
Issues Involved:
1. Whether the payment to the Operational Creditor was due from the Corporate Debtor, giving rise to an operational debt. 2. Whether a default has been committed by the Corporate Debtor in respect of payment of such operational debt. 3. Whether the operational debt exceeds the threshold level and is an undisputed debt. 4. Whether there is an existence of a pre-existing dispute between the parties. Detailed Analysis: 1. Payment Due and Operational Debt: The tribunal examined whether the payment to the Operational Creditor was due from the Corporate Debtor, thereby constituting an operational debt. The Operational Creditor had supplied goods to the Corporate Debtor, who acknowledged owing USD 88,81,595 in an email dated 03.03.2021. The Corporate Debtor admitted to having financial difficulties due to the COVID-19 pandemic, which affected cash flow and delayed payments. The tribunal found that the Corporate Debtor had acknowledged the operational debt and attributed non-payment to adverse cash flow rather than any dispute with the Operational Creditor, thus establishing the existence of an operational debt. 2. Default in Payment: The tribunal assessed whether a default had been committed by the Corporate Debtor in the payment of the operational debt. The Corporate Debtor had admitted the debt multiple times but failed to make full payment, despite partial payments being made. The tribunal noted that the Corporate Debtor had confirmed the outstanding amount in their books and had made payments post-confirmation, indicating an admission of debt and default. The tribunal concluded that the Corporate Debtor defaulted in payment as the debt exceeded the threshold of Rs 1 Cr, thereby establishing default. 3. Threshold Level and Undisputed Debt: The tribunal evaluated whether the operational debt exceeded the threshold level and was undisputed. The Corporate Debtor admitted a debt of USD 8.8 million, which was above the threshold limit. The tribunal found no outright denial of the debt by the Corporate Debtor before the demand notice, and the debt was acknowledged in various communications. The tribunal held that the admitted debt was undisputed and above the threshold, supporting the initiation of CIRP. 4. Existence of Pre-existing Dispute: The tribunal examined whether there was a pre-existing dispute between the parties. The Corporate Debtor claimed disputes regarding the quality of goods and an agreement dated 21.06.2015, which was denied by the Operational Creditor as a forged document. The tribunal found no credible evidence supporting the existence of this agreement or any pre-existing dispute. The tribunal noted that the Corporate Debtor's claims of disputes were raised only after the demand notice and were inconsistent with prior acknowledgments of debt. The tribunal concluded that the alleged disputes were not genuine and dismissed them as moonshine defenses. Conclusion: The tribunal concluded that the Appellant defaulted in the payment of the operational debt, which was due and payable above the threshold limit. In the absence of any credible pre-existing dispute, the tribunal found no error in the Adjudicating Authority's decision to admit the Section 9 application and initiate CIRP. The appeal was dismissed with no costs.
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