2019 (2) TMI 1571 - Tri - Insolvency and Bankruptcy

Dismissal of petition under Section 9 of Insolvency Code due to payment, interest dispute

Govind Sales Versus Gammon India Limited

The tribunal dismissed the petition under Section 9 of the Insolvency & Bankruptcy Code, 2016, as the principal amount was paid, and the dispute over ... Corporate Insolvency Resolution Process - existing dispute - HELD THAT:- Admittedly, the entire principal amount has been paid by the Corporate Debtor to the Operational Creditor during the pendency of the present petition. The Operational Creditor vehemently argued that the statutory interest provided for by the MSME Act on the delayed payments is still pending and the present petition should be admitted. The interest arising from the MSME Act has been disputed by the Corporate Debtor. The Corporate Debtor vehemently argued that the Operational Creditor has not produced any document to show that it is registered under the MSME Act. As argued, that the only document relied upon by the Operational Creditor is a Form/ Memorandum downloaded by it from the website of the Directorate under the MSME Act, which does not establish the registration. As argued that such a dispute can only be adjudicated by the dispute resolution mechanism provided under the MSME Act. In this case undisputedly the principal amount has been paid off during the pendency of the petition. Dispute that has been raised is relating to the interest amount which is being claimed on the basis of the MSME Act. The contention of the Operational Creditor is based on the fact that as per the statutory provision of the MSME Act, Petitioner is entitled for interest even without any prior agreement. The Corporate Debtor has raised the dispute regarding the registration of the Operational Creditor as a MSME unit. There is a plausible contention in the argument raised by the Corporate Debtor which requires further investigation and it appears that the dispute raised by the Corporate Debtor is not a patently feeble legal argument or an assertion of fact unsupported by evidence. Hon’le Supreme Court in Mobilox Innovations (P) Ltd. (2017 (9) TMI 1270 - SUPREME COURT OF INDIA), in case of an existing dispute, the application under Section 9, IBC is to be dismissed. The Adjudicating Authority does not have powers of a civil court to adjudicate upon the entitlement of the Operational Creditor to the benefits accruing from the MSME Act. The petition does not deserve to be admitted. In this scenario, the objections raised by the Corporate Debtor regarding the eligibility of Mr. Sanjay Kumar Ruia to initiate and maintain the present application and the question of appointment of the proposed Interim Resolution Professional, who has later on recused from the assignment have no significance. This Petition is dismissed. Issues Involved:1. Non-payment of principal and interest by the Corporate Debtor.2. Time-barred claims and acknowledgment of invoices.3. Applicability of the MSME Act for interest calculation.4. Eligibility of the petitioner and the proposed Interim Resolution Professional.5. Definition of 'Operational Debt' under IBC and its inclusion of interest.6. Registration status of the Operational Creditor under the MSME Act.7. Adjudicating authority's power to resolve disputes under MSME Act.Detailed Analysis:1. Non-payment of Principal and Interest:The Operational Creditor filed a petition under Section 9 of the Insolvency & Bankruptcy Code, 2016, claiming that the Corporate Debtor failed to pay Rs. 55,91,980, consisting of a principal amount of Rs. 33,72,579 and interest of Rs. 22,19,401 at 18% per annum. The petition aimed to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.2. Time-barred Claims and Acknowledgment of Invoices:The Corporate Debtor contended that a substantial part of the claim was time-barred and that the invoices did not bear acknowledgment by the Respondent. The Operational Creditor argued that no goods were returned, and objections were not raised previously, thus the dispute could not be raised belatedly.3. Applicability of MSME Act for Interest Calculation:The Operational Creditor claimed interest under the MSME Act, calculating it after deducting the maximum allowable credit period of 45 days. The Corporate Debtor disputed this, arguing that the MSME Act's interest provisions could not be entertained under the IBC and required adjudication by the Facilitation Council.4. Eligibility of the Petitioner and Proposed Interim Resolution Professional:The Corporate Debtor questioned the eligibility of Mr. Sanjay Kumar Ruia to initiate the application, citing disciplinary proceedings against him and the incorrect Vakalatnama. Additionally, the proposed Interim Resolution Professional, Mrs. Bhavna Sanjay Ruia, was argued to be ineligible due to suspension by the IBBI and her relationship with the professional representative of the Petitioner.5. Definition of 'Operational Debt' under IBC and Inclusion of Interest:The Corporate Debtor argued that interest could not be the basis for an application under Section 9 of IBC, as the definition of 'operational debt' under Section 5(21) does not include interest, unlike 'financial debt' under Section 5(8). They cited various case laws supporting this view.6. Registration Status of the Operational Creditor under MSME Act:The Corporate Debtor disputed the Operational Creditor's registration under the MSME Act, arguing that the only document provided was a downloaded form, which did not establish registration. The Operational Creditor countered with a Udyog Aadhar Memorandum, claiming it proved compliance.7. Adjudicating Authority's Power to Resolve Disputes under MSME Act:The tribunal noted that the dispute regarding the MSME registration and interest calculation required further investigation and could not be resolved by the Adjudicating Authority, which lacks the powers of a civil court to adjudicate such matters.Conclusion:The tribunal dismissed the petition, noting that the principal amount had been paid and the dispute over interest required further investigation. The objections regarding the eligibility of the petitioner and the proposed Interim Resolution Professional were deemed insignificant in light of the dismissal. The tribunal directed the Registry to communicate the order to both parties.