Tribunal rejects CIRP initiation application due to plausible dispute needing investigation.

The Tribunal rejected the application for initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016, as the dispute raised by the corporate debtor was found to be plausible and required further investigation. The application was rejected under Section 9(5)(ii)(d) of the Code, emphasizing that the discussion was limited to the determination of the issue of admission under Section 9 and not on the merits of the claim for debt due. Consequently, CP(IB) No. 295/Chd/Pb/2018 was rejected.

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Issues Involved:
1. Validity of the Resolution Professional's authority to pursue the petition.
2. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.
3. Existence of a pre-existing dispute between the operational creditor and the corporate debtor.
4. Evaluation of evidence and determination of whether the dispute is genuine or spurious.

Detailed Analysis:

1. Validity of the Resolution Professional's Authority to Pursue the Petition:
The Resolution Professional (RP) of the petitioner company/operational creditor filed CA No. 939/2019, stating that CIRP proceedings were initiated in CP(IB) No. 198/Chd/CHD/2018. Consequently, the Board of Directors was suspended, and the RP became the authorized representative of the petitioner. The RP was permitted to pursue CP(IB) No. 295/Chd/Pb/2018 in place of the suspended Board of Directors. The amended Memo of Parties was filed, and CA No. 939/2019 was disposed of accordingly.

2. Initiation of CIRP under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, by M/s. Ria Constructions Limited (Operational Creditor) against Blessing Resorts Private Limited (Corporate Debtor) for initiating CIRP. The operational creditor claimed an outstanding amount of Rs. 4,31,73,446/- along with interest @ 18% per annum. The demand notice in Form No. 3 was issued on 21.02.2018, calling upon the corporate debtor to repay the unpaid operational debt within 10 days. The notice was sent through speed post but was returned with the remarks "refused to accept."

3. Existence of a Pre-existing Dispute:
The Corporate Debtor filed a reply stating a pre-existing dispute between the parties, leading to the termination of the agreement/letter of intent. The corporate debtor alleged that the operational creditor defaulted in completing the project within the stipulated time frame and with the required standards, resulting in the termination of the contract on 07.10.2016. The operational creditor, however, contended that the termination was due to the corporate debtor's inability to pay dues and that the letter of termination was never received.

4. Evaluation of Evidence and Determination of Whether the Dispute is Genuine or Spurious:
The Tribunal referred to the Supreme Court's judgment in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd., which emphasized that the adjudicating authority must reject the application if there is a record of dispute. The Tribunal found that the corporate debtor's contention of a dispute was plausible and required further investigation. The operational creditor's claim of an outstanding amount of Rs. 4,31,73,446/- was based on an unsigned/unverified document, and the corporate debtor had made payments up to certain RA bills, which were the last verified invoices. The Tribunal concluded that the dispute was not a patently feeble legal argument or an assertion of fact unsupported by evidence.

Conclusion:
The Tribunal concluded that the claim of dispute raised by the corporate debtor was a plausible contention requiring further investigation. Consequently, the application for initiation of CIRP was rejected under Section 9(5)(ii)(d) of the Code. The Tribunal clarified that the discussion was limited to the determination of the issue of admission under Section 9 of the Code and not on the merits of the claim by Ria Constructions Ltd. for debt due from Blessings Resorts Pvt. Ltd. As a result, CP(IB) No. 295/Chd/Pb/2018 was rejected.

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