2019 (1) TMI 137 - Tri - Insolvency and Bankruptcy

Petition to Initiate Corporate Insolvency Process Rejected

M/s. IMECO Limited Versus BEML Limited

M/s. IMECO Limited Versus BEML Limited - TMI Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP).2. Existence of a debt and default.3. Terms of payment as per Memorandum of Agreement (MoA).4. Pending litigation and its impact on the current petition.5. Applicability of the Limitation Act.6. Bona fide dispute between parties.Issue-Wise Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP):The petition was filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate CIRP against the Corporate Debtor for an outstanding amount of Rs. 38,77,88,860. The Tribunal examined the scope of its jurisdiction under Section 9, emphasizing that the existence of an undisputed debt is a sine qua non for initiating CIRP. The Tribunal referred to the Supreme Court's decision in the case of Transmission Corpn. of Andhra Pradesh Ltd. v. Equipment Conductors & Cables Ltd., which reiterated that the adjudicating authority must ensure that there is a debt payable and that the corporate debtor has not repaid the same.2. Existence of a Debt and Default:The Tribunal noted that the Corporate Debtor had raised a dispute regarding the payment terms, which were based on a back-to-back mechanism with the Indian Railways. The Operational Creditor's claim was contingent upon the Corporate Debtor receiving payments from the Railways. The Tribunal highlighted that the Hon'ble High Court of Calcutta had previously directed that payments to the Operational Creditor would only be made after the Corporate Debtor received funds from the Railways. Therefore, the Tribunal concluded that there was no default as long as the issue of payment from the Railways was pending.3. Terms of Payment as per Memorandum of Agreement (MoA):The MoA dated 18.09.2007 between the parties specified that payments to the Operational Creditor would be made on a back-to-back basis, i.e., in proportion to and in relation to receipt of payment from the Railways. The Tribunal found that the Operational Creditor was aware of and had acknowledged this payment mechanism in several correspondences. The Tribunal also noted that the Hon'ble High Court of Calcutta had accepted the back-to-back payment terms in its previous judgment.4. Pending Litigation and Its Impact on the Current Petition:The Tribunal observed that the Operational Creditor had filed a writ petition before the Hon'ble High Court of Calcutta, seeking payment of outstanding dues from the Corporate Debtor and the Railways. The High Court had directed the Railways to release funds to the Corporate Debtor, who would then pay the Operational Creditor. However, the Railways had filed an appeal against this order, which was still pending. The Tribunal held that the existence of this pending litigation meant that the debt in question was not yet payable to the Operational Creditor.5. Applicability of the Limitation Act:The Tribunal referred to the Supreme Court's decision in B.K. Educational Services (P.) Ltd. v. Parag Gupta & Associates, which held that the provisions of the Limitation Act apply to proceedings under the IBC. The Tribunal noted that the High Court of Calcutta had accepted the Operational Creditor's claim as bona fide and directed the Railways to release funds. Therefore, the question of limitation did not arise in this case, as the matter was still sub judice.6. Bona Fide Dispute Between Parties:The Tribunal concluded that there was a bona fide dispute between the parties regarding the payment terms and the contingent nature of the debt. It referred to the Supreme Court's decision in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd., which stated that the IBC is not intended to be a substitute for a recovery forum and that the existence of a real dispute precludes the initiation of CIRP. The Tribunal found that the dispute in this case was not spurious or illusory and, therefore, the petition was not maintainable.Conclusion:The Tribunal rejected the petition to initiate CIRP against the Corporate Debtor, citing the existence of a bona fide dispute and the contingent nature of the debt. The Tribunal emphasized that the Operational Creditor could pursue other remedies available under the law, including the pending writ appeal before the Hon'ble High Court of Calcutta.