2020 (7) TMI 795 - Tri - Insolvency and Bankruptcy

Petition to Initiate Insolvency Process Dismissed for Lack of Maintainability

The Tribunal dismissed the petition for Corporate Insolvency Resolution Process against M/s Jaroli Agro Private Limited, finding that the claim by M/s Jai ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Operational Debt or not - existence of debt and dispute or not - HELD THAT:- The ledger shows that ₹ 30,00,000/- was given as loan to the corporate debtor, hence the contention that it is advance towards commission is falsified. It is to be noted that for another sum of ₹ 10,00,000/-paid as commission advance on the same day, TDS of ₹ 1,00,000 is deducted, whereas ₹ 30,00,000 has been accounted as loan and no TDS has been deducted. Had it been an advance commission as contended by the petitioner, TDS of ₹ 4,00,000 would have been deducted. Hence the amount of ₹ 30 lacs paid is clearly a loan as depicted in the ledger. Hence the contention of the petitioner that ₹ 30,00,000/- is an advance towards commission payable to the corporate debtor is falsified. When the amount paid is a loan, the same does not fall under the definition of the Operational debt as provided under Section 5 (21) of the code which provides that “operational debt” means a claim in respect of provision of goods or services including employment or debt in respect of the payment of dues arising under any law for the time being enforce and payable to the central government, any state government or any local authority” - the amount claimed is not an operational debt and the petition is not maintainable. Since the corporate debtor submitted that this payment of ₹ 30,00,000/- is towards part satisfaction of the Memorandum of Understanding (MoU) dated 24/08/2013, both in this proceedings, which was initiated well before the present petition, there is a pre-existing dispute in respect of the claim and hence the dispute raised by the Corporate debtor will squarely fall under the definition of dispute as defined under Section 5 (6) of the code which provides that “dispute”, includes a suit or arbitration proceedings relating to (a) the existence of the amount of debt; (b) the quality of goods or service; or (c) the breach of a representation or warranty.” Petition dismissed. Issues:Initiation of Corporate Insolvency Resolution Process based on default in payment against a Corporate Debtor.Analysis:The petitioner, M/s Jai International Pvt. Ltd., filed a petition for Corporate Insolvency Resolution Process (CIRP) against M/s Jaroli Agro Private Limited, alleging default in payment of Rs. 30,75,408. The petitioner had paid an advance of Rs. 40,00,000 to the Corporate Debtor for consultancy services in export of agricultural products. The Corporate Debtor was introduced by Mr. Prajendra Jaroli, who was previously employed by the petitioner. The petitioner claimed that only Rs. 10,00,000 was adjusted from the advance, leaving a balance of Rs. 30,75,408 unpaid. The Corporate Debtor disputed the claim, citing a pre-existing dispute and contending that the amount was part of a Memorandum of Understanding (MoU) dated 24/08/2013. The Corporate Debtor argued that the amount was treated as a loan, not commission, and thus, not an operational debt as per the Insolvency and Bankruptcy Code. The ledger accounts presented by both parties showed conflicting interpretations of the nature of the payment, with the petitioner claiming it as commission and the Corporate Debtor considering it a loan.The Tribunal observed that the ledger indicated the payment of Rs. 30,00,000 as a loan, not an advance commission, as claimed by the petitioner. As per Section 5(21) of the Code, operational debt pertains to goods or services, which this payment did not fall under. The Tribunal also noted the ongoing dispute between the parties, as evidenced by previous legal proceedings initiated by Mr. Prajendra Jaroli against the petitioner. This pre-existing dispute fell under the definition of a dispute as per Section 5(6) of the Code. The Tribunal found that the petition was filed for recovery purposes, rather than as a genuine insolvency matter, and was not maintainable under Section 9 of the Insolvency and Bankruptcy Code. Additionally, the claim was held to be time-barred due to the lack of payment or acknowledgment of liability within the limitation period. The Tribunal dismissed the petition, stating that the Corporate Debtor's contentions regarding the nature of the payment, pre-existing dispute, and limitation period were valid reasons for the dismissal.