2022 (5) TMI 1443 - Tri - Insolvency and Bankruptcy

Tribunal dismisses application for financial document disclosure in favor of Civil Court resolution

Trident Fabricators Private Limited Versus Hiranmaye Energy Limited

The Tribunal dismissed the application seeking disclosure of financial documents by the Corporate Debtor, emphasizing the Operational Creditor's need to ... Maintainability of application - initiation of CIRP - Operational Creditor is constrained to take action against the Corporate Debtor on failure of them to pay the admitted debts - existence of debt and dispute or not - application filed by an authorized person or not - issuance of demand notice as per the provisions of the IBC, 2016 and the Rules and Regulation framed thereunder or not - privity of contract between Operational Creditor and Corporate Debtor - time limitation - HELD THAT:- It appears that the Operational Creditor has a good case to be tried in Civil Court but not before this Adjudicating Authority because the Corporate Debtor has raised so many issues regarding privitiy of contract with the Operational Creditor which cannot be sorted out or decided by this Adjudicating Authority in this matter of summary procedure. This Adjudicating Authority has a very limited jurisdiction of looking at the petition containing the information relating to existing outstanding debt and default in repayment thereof by the Corporate Debtor. If the Corporate Debtor has committed a default,the Operational Creditor has to place all documents on record. This Adjudicating Authority has only to see the authenticity of the information and the documents for reaching a conclusion whether a case for admission of the petition or initiation of CIRP is made out or not. The prayer clause of the Operational Creditor seeking directions upon the Corporate Debtor to produce all the documents by way of an affidavit, so that the Operational Creditor may prove its case against the Corporate Debtor is, to our mind, beyond our jurisdiction. Each Operational Creditor has to prove its own case. It cannot base its claim on the basis of documents to be produced by the opposite party and this Adjudicating Authority would not like to be passing such a direction upon the Corporate Debtor to facilitate the admission of petition filed by the Operational Creditor - Application dismissed. Issues Involved:1. Disclosure of necessary documents by the Corporate Debtor.2. Existence of privity of contract between the Operational Creditor and the Corporate Debtor.3. Pre-existing disputes and arbitration between the Corporate Debtor and Scorpio Engineering Pvt. Ltd.4. Validity of the demand notice and the application under the Insolvency and Bankruptcy Code, 2016.Issue-wise Detailed Analysis:1. Disclosure of Necessary Documents by the Corporate Debtor:The Operational Creditor sought directions for the Corporate Debtor to file an affidavit disclosing detailed balance sheets, ledger accounts, trial balances, and other financial statements from 2015-2016 to 2020-2021. The Operational Creditor argued that without these documents, they would suffer irreparable loss and injury. However, the Tribunal concluded that it is beyond their jurisdiction to direct the Corporate Debtor to produce such documents. The Tribunal emphasized that the Operational Creditor must prove its case with its own documents and cannot rely on the documents from the opposite party. Consequently, the application seeking these directions was dismissed.2. Existence of Privity of Contract Between the Operational Creditor and the Corporate Debtor:The Corporate Debtor contended that there was no privity of contract between them and the Operational Creditor, asserting that the Operational Creditor was a sub-contractor of Scorpio Engineering Pvt. Ltd., and any payment obligation lay with Scorpio, not with the Corporate Debtor. The Corporate Debtor further argued that no bills were raised by the Operational Creditor directly on them. The Tribunal noted that the Corporate Debtor raised substantial issues regarding the privity of contract, which are complex and cannot be resolved in a summary proceeding before the Tribunal. Therefore, it was suggested that the Operational Creditor might have a better case in a Civil Court.3. Pre-existing Disputes and Arbitration Between the Corporate Debtor and Scorpio Engineering Pvt. Ltd.:The Corporate Debtor highlighted pre-existing disputes with Scorpio Engineering Pvt. Ltd., which were subject to ongoing arbitration. They argued that these disputes impacted their obligations and payments related to the Operational Creditor. The Tribunal acknowledged these disputes and the arbitration proceedings, indicating that such pre-existing disputes complicate the matter and are not suitable for resolution under the summary procedure of the Tribunal.4. Validity of the Demand Notice and the Application Under the Insolvency and Bankruptcy Code, 2016:The Corporate Debtor challenged the validity of the demand notice and the application under the Insolvency and Bankruptcy Code, 2016, on several grounds, including the lack of an affidavit under section 9(3)(b) and improper issuance of the demand notice. They also claimed that the application was barred by limitation and that there was no default on their part. The Tribunal did not delve deeply into these procedural arguments but focused on the substantive issues of privity of contract and pre-existing disputes, which led to the dismissal of the application.Conclusion:The Tribunal concluded that the issues raised by the Corporate Debtor regarding the privity of contract and pre-existing disputes are complex and cannot be resolved in a summary proceeding. Therefore, the application seeking directions for the Corporate Debtor to disclose documents was dismissed, and the Operational Creditor was advised to pursue their case in a Civil Court. The Tribunal emphasized its limited jurisdiction and the need for the Operational Creditor to prove its case with its own documents.