Tribunal dismisses insolvency application, imposes costs on petitioner for outstanding debt dispute

The Tribunal dismissed the application under the Insolvency & Bankruptcy Code, 2016, for an outstanding debt of Rs. 20,50,385/-, imposing costs of Rs. 50,000/- on the petitioner. The decision was based on the pre-existence of a dispute, procedural non-compliance, the doctrine of delay and laches, and the respondent's demonstrated solvency, emphasizing adherence to procedural requirements and timely enforcement of claims to prevent unnecessary insolvency proceedings.

---

---

Issues Involved:
1. Claim of outstanding debt and default.
2. Pre-existence of a dispute.
3. Procedural non-compliance.
4. Applicability of the Limitation Act.
5. Solvency of the respondent company.

Issue-wise Detailed Analysis:

1. Claim of Outstanding Debt and Default:
The petitioner, claiming to be an Operational Creditor, filed an application under the Insolvency & Bankruptcy Code, 2016 (IBC, 2016) against the respondent for an outstanding sum of Rs. 20,50,385/-. The debt arose from a purchase order dated 28.3.2017 for the supply and installation of Solar Photovoltaic Plants. The petitioner completed the erection and commissioning on 28.12.2011, but the respondent failed to pay the remaining balance since 29th Nov 2012. Despite a demand notice issued under Section 8 of IBC, 2016, the respondent did not make the payment, leading to the initiation of the Corporate Insolvency Resolution Process (CIRP).

2. Pre-existence of a Dispute:
The respondent contended that a pre-existing dispute rendered the petition non-maintainable. They highlighted a winding-up notice sent on 5.5.2017 and a subsequent reply disputing the claim on grounds of non-fulfillment of obligations by the petitioner. The respondent also referenced an email from 2013 and a letter from Rajasthan Renewable Energy Corporation Limited indicating a subsidy denial due to a faulty inverter supplied by the petitioner. The Tribunal noted that the petitioner did not take action to rectify the alleged defects, which contributed to the dispute.

3. Procedural Non-compliance:
The respondent raised several procedural objections:
- The demand notice was issued by an unauthorized advocate.
- Non-compliance with Section 9(3)(b) and 9(3)(c) of IBC, 2016, as the petitioner failed to furnish the required affidavit and banker’s certificate.
- The Tribunal found merit in these objections, citing relevant case laws that emphasized the mandatory nature of these procedural requirements.

4. Applicability of the Limitation Act:
The Tribunal discussed the applicability of the Limitation Act, 1963, to IBC proceedings. Despite a judgment from the Hon’ble NCLAT indicating that the Limitation Act does not apply to IBC, the Tribunal considered the doctrine of delay and laches. The petitioner’s claim, being more than five years old without any judicial action, was deemed barred by limitation. The Tribunal referenced several judgments to support this view, including Deem Roll-Tech. Ltd. v. R.L. Steel & Energy Ltd. and Neelkanth Township & Construction (P.) Ltd. v. Unban Infrastructure Trustees Limited.

5. Solvency of the Respondent Company:
The respondent argued that they were a profit-making company with a turnover of approximately US $500 Million and employed around 200 employees. The Tribunal considered this argument, noting that the respondent’s solvency contradicted the petitioner’s portrayal of insolvency.

Conclusion:
The Tribunal dismissed the application, finding it frivolous and imposing costs of Rs. 50,000/- on the petitioner. The decision was based on the pre-existence of a dispute, procedural non-compliance, the doctrine of delay and laches, and the respondent’s solvency. The Tribunal emphasized the importance of adhering to procedural requirements and timely enforcement of claims to avoid unnecessary insolvency proceedings.

---