2019 (8) TMI 1471 - Tri - Insolvency and Bankruptcy

Tribunal dismisses creditor's insolvency application due to invoice discrepancies and lack of Section 8 notice

Mascot Petrochem Private Limited Versus Midaas Construction Company Private Limited,

The Tribunal rejected the Operational Creditor's application under Section 9 of the Insolvency and Bankruptcy Code against the Corporate Debtor due to ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Service of notice - HELD THAT:- The Operational Creditor is required to deliver the notice of demand along with invoices to the Corporate Debtor in prescribed form and manner as per the provisions of section 8 read with relevant regulations before filing a petition under section 9 of the I & B Code 2016. The requirement of service of notice of demand under section 8 has been provided to grant an opportunity to the Corporate Debtor to communicate its view point before proceeding under section 9 can be initiated and as per the scheme of I & B Code 2016, strict onus lies on the shoulders of Corporate Debtor to show the existence of dispute before delivery of notice u/s 8, otherwise the purpose of sections 8 and 9 proceeding would get defeated if frivolous contentions of Corporate Debtor are accepted and, simultaneously, Operational Creditor cannot use the mechanism of I & B Code 2016 as a recovery tool. This authority is not required to prove the veracity of the claim of either party and is only concerned with the aspect of existence of dispute prior to delivery of notice u/s 8 of the I & B Code 2016 for the purpose of deciding the fate Of application under section 9 of I & B Code 2016. Petition dismissed. Issues:Application under Section 9 of the Insolvency and Bankruptcy Code filed by Operational Creditor against Corporate Debtor for default in payment of outstanding debt.Analysis:1. The Operational Creditor filed the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor for defaulting on a debt of Rs. 26,19,417.50, comprising the principal amount and interest. The Corporate Debtor had allegedly not paid for supplied goods as per purchase orders starting from 2015, with the last payment made in April 2017. The Corporate Debtor disputed the claim, stating that some materials were never delivered, and challenged the validity of certain invoices.2. The Operational Creditor argued that the Corporate Debtor intentionally withheld payment after receiving and using the supplied goods. The Corporate Debtor, in response, claimed that a portion of the amount was paid as per their books of account and raised objections regarding discrepancies in invoices and technicalities related to the application filed under Section 9 of the IBC, 2016.3. The Tribunal examined the documents and submissions from both parties. It noted discrepancies in the invoices provided by the Operational Creditor, including differences in rates, grades, and quantities mentioned in the invoices. The Corporate Debtor had partially accepted liability for a specific amount but disputed the rest based on alleged discrepancies in the invoices and delivery of goods.4. The Tribunal observed that the Operational Creditor had not communicated the amount payable by the Corporate Debtor for the invoices in question between the last payment received in April 2017 and the filing of the petition in December 2018. The Corporate Debtor had made partial payments totaling approximately Rs. 34 lakhs out of the total supply value of around Rs. 46 lakhs, supporting their claim.5. Based on the facts and legal provisions, the Tribunal emphasized the importance of serving a notice of demand under Section 8 before initiating proceedings under Section 9 of the IBC, 2016. It highlighted the strict onus on the Corporate Debtor to demonstrate the existence of a dispute before the notice under Section 8 is delivered. The Tribunal concluded that the petition was liable to be rejected due to the existence of disputes and discrepancies in the documents provided.6. Consequently, the Tribunal rejected the application under Section 9 of the IBC, 2016, without imposing costs on either party. The parties were directed to receive free copies of the order, and urgent copies were to be provided upon request, subject to necessary formalities.