2019 (12) TMI 1407 - Tri - Insolvency and Bankruptcy

Tribunal Dismisses CIRP Application Due to Genuine Dispute

C.S. Srinivasan and Ors. Versus Pentafour Products Ltd.

The Tribunal dismissed the application to initiate Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency & Bankruptcy Code, ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- The Operational Creditor themselves have filed a Writ Appeal against the 12(3) Settlement arrived at between the parties, which goes on to show that there exists a dispute. There is a genuine dispute between the parties and the defence raised by the Corporate Debtor on the grounds of existence of a dispute are real and not spurious, hypothetical, illusory or misconceived. Petition dismissed. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency & Bankruptcy Code, 2016.2. Existence of a 'dispute' between the parties before the issuance of the Demand Notice.3. Binding nature of the 12(3) Settlement under the Industrial Dispute Act, 1947.4. Finality of the orders passed by the Assistant Commissioner of Labour regarding gratuity claims.Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency & Bankruptcy Code, 2016:The application was filed by 20 individuals, retired employees of the Corporate Debtor, seeking to initiate CIRP against the Corporate Debtor under Section 9 of the IBC, 2016. They claimed an operational debt of Rs. 67,68,368/- based on orders issued by the Assistant Commissioner of Labour under the Payment of Gratuity Act, 1972. The application included details of the Corporate Debtor's incorporation, authorized capital, and registered office.2. Existence of a 'dispute' between the parties before the issuance of the Demand Notice:The Tribunal needed to determine if a 'dispute' existed before the issuance of the Demand Notice under Section 8 of the IBC, 2016. The Corporate Debtor argued that the claims were over and above the 12(3) Settlement amount and were subject to a pending Writ Petition (W.P. No. 9014/2017). The Operational Creditors contended that they were not parties to the said Writ Petition and that the orders by the Assistant Commissioner of Labour had attained finality since they were not challenged by the Corporate Debtor.3. Binding nature of the 12(3) Settlement under the Industrial Dispute Act, 1947:The Corporate Debtor argued that the Operational Creditors were part of the 12(3) Settlement dated 19.04.2006, which was binding and any claims over and above the settlement were disputed. The Operational Creditors countered that the binding nature of the 12(3) Settlement was under challenge in a Writ Appeal (W.A. No. 2115/2012) before the Madras High Court, and thus, the Corporate Debtor was still obligated to pay the gratuity as directed by the Assistant Commissioner of Labour.4. Finality of the orders passed by the Assistant Commissioner of Labour regarding gratuity claims:The Operational Creditors argued that the orders by the Assistant Commissioner of Labour dated 14.03.2017, 19.07.2018, and 25.07.2018 had not been challenged by the Corporate Debtor and thus had attained finality. The Corporate Debtor, however, highlighted that the existence of a dispute was evident from the pending Writ Appeal challenging the 12(3) Settlement, which included most of the petitioners.Judgment:The Tribunal concluded that a genuine dispute existed between the parties, as the Operational Creditors themselves had filed a Writ Appeal against the 12(3) Settlement. Citing the Supreme Court's decision in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited, the Tribunal emphasized that the existence of a dispute must be pre-existing before the receipt of the Demand Notice. The Tribunal found the dispute to be real and not spurious, hypothetical, illusory, or misconceived. Consequently, the petition was dismissed without costs.