2017 (10) TMI 356 - Tri - Insolvency and Bankruptcy

Tribunal dismisses insolvency petition, questions creditor's claim under MSME Act, and addresses false media reporting

M/s. Teknow Consultants & Engineers Pvt. Ltd. Versus M/s. Bharat Heavy Electricals Limited

The tribunal rejected the insolvency petition against the Corporate Debtor, citing the existence of a pre-existing dispute over withheld payments and ... Initiation of a resolution process against the Corporate Debtor, BHEL - Insolvency and Bankruptcy Code 2016 - Held that:- As there is an existing dispute with respect to the right to withhold, and also in respect of the liability to pay interest, the insolvency resolution process against the Corporate Debtor cannot be admitted. The petition is therefore Rejected. While the Operational Creditor's petition (IB)-269(ND)/2017 is disposed off as having been Rejected, the Bench officer shall register the Show Cause notice as separate proceedings and issue notices returnable on 20th September, 2017. Service on the Managing Director of the Social Media shall be effected at the email and address of the registered office of the Social Media to be provided by Operational Creditor as well as the Bench Officer. Issues Involved:1. Whether the debt claimed by the Operational Creditor is time-barred.2. Whether there exists a pre-existing dispute regarding the debt.3. Whether the interest claimed under the MSME Act is sustainable.4. Whether the Operational Creditor failed to disclose material facts.5. Whether false reporting in the media warrants contempt of court proceedings.Issue-wise Detailed Analysis:1. Time-barred Debt:The Corporate Debtor argued that the debt claimed by the Operational Creditor is time-barred. However, the tribunal did not specifically address this issue in the judgment, focusing instead on the pre-existing dispute and the interest claim.2. Pre-existing Dispute:The tribunal found that there was a pre-existing dispute between the parties. The Corporate Debtor withheld the amounts due under the first two contracts as security for counter recoveries related to the third contract at Barsingsar. The tribunal noted that the Operational Creditor had an arbitration award in its favor, but an appeal under Section 37 of the Arbitration and Conciliation Act was still pending. The tribunal emphasized that proceedings under Section 37 are a continuation of the arbitration proceedings and thus, the dispute had not achieved finality. The tribunal cited judgments from the Hon'ble High Court of Bombay to support this view.3. Interest Claim under MSME Act:The tribunal found that the interest claimed by the Operational Creditor under the MSME Act was disputed. The Corporate Debtor argued that the Operational Creditor was not registered as an MSME at the time of accepting the job order and that the interest claim was not sustainable. The tribunal referred to Clause 5.6 of the job work agreement, which stated that no interest would be payable by BHEL on any money due to the contractor. The tribunal also noted that the Hon'ble High Court of Delhi had disallowed interest for the pre-award period in a related arbitration proceeding. Therefore, the tribunal concluded that the interest claim was disputable and could only be adjudicated under the dispute resolution mechanism of the MSME Act.4. Failure to Disclose Material Facts:The tribunal took note of the fact that the Operational Creditor failed to disclose the filing of an appeal under Section 37 by the Corporate Debtor. The tribunal found that the notice under Section 8 of the Insolvency and Bankruptcy Code was sent after the appeal was filed, and the Operational Creditor was aware of the appeal but did not disclose it in the petition. However, the tribunal decided not to penalize the Operational Creditor under Section 76 of the Code for this non-disclosure.5. False Reporting in Media:The tribunal took serious note of false reporting in the media, which claimed that the court had asked BHEL to pay the due amount to the MSME or be declared insolvent. The tribunal clarified that no such order or observation was made. The tribunal issued a show cause notice to Shri Shishir Gupta, Director of the Operational Creditor, and the Managing Director of the social media outlet KNN Network for false and defamatory reporting.Conclusion:The tribunal concluded that there was an existing dispute regarding the right to withhold payments and the liability to pay interest. Therefore, the insolvency resolution process against the Corporate Debtor could not be admitted, and the petition was rejected. The tribunal also initiated separate proceedings for the false media reporting issue.