2019 (11) TMI 964 - Tri - Insolvency and Bankruptcy

Tribunal rules in favor of Applicant in debt acknowledgment case

The Tribunal found in favor of the Applicant, determining that the Application was within the Law of Limitation due to acknowledgments of debt provided by ... Acknowledgement in writing under Section 18 of the Limitation Act, 1963 - operational creditor's claim and initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - dispute as defined in Section 5(6) of the Insolvency and Bankruptcy Code, 2016 - moonshine dispute - jurisdiction of the Adjudicating Authority - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution ProfessionalAcknowledgement in writing under Section 18 of the Limitation Act, 1963 - Application is within the law of limitation - HELD THAT: - Though debit notes were raised in 2012 and 2013, the Corporate Debtor executed confirmation of accounts letters dated 01.04.2015, 01.04.2016, 01.04.2017 and 01.04.2018 bearing its stamp and signed by authorised signatory. In terms of Section 18(1) of the Limitation Act, such written acknowledgements renew the limitation period and therefore the present Section 9 application is within time. [Paras 18]Limitation objection rejected; application is within limitation.Demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - operational creditor's claim and initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Existence of undisputed operational debt and sufficiency of Section 8 notice for Section 9 admission - HELD THAT: - The Applicant served a Section 8 demand notice which was received by the Corporate Debtor on 05.12.2018 and filed the statutory certificate under Section 9(3)(c). The Corporate Debtor did not produce evidence of payment of the claimed debt and the balance was admitted in its balance sheet for the 2014-15 year. No response disputing the debit notes prior to receipt of the Section 8 notice was established. On the material before the Tribunal, the Applicant has established default of the operational debt beyond reasonable doubt and entitlement to initiate CIRP under Section 9. [Paras 5, 7, 8, 19, 23]Application under Section 9 admitted for initiation of CIRP.Dispute as defined in Section 5(6) of the Insolvency and Bankruptcy Code, 2016 - moonshine dispute - Dispute raised by the Corporate Debtor is not a genuine dispute within the meaning of Section 5(6) and is a moonshine dispute - HELD THAT: - Section 5(6) includes existence of amount of debt as a relevant category of dispute. The Corporate Debtor relied on alleged disputes and a Settlement-cum-Termination Agreement executed in August 2018 between other parties, and asserted lack of authority of certain signatories. However, the Corporate Debtor had executed confirmations of account and shown the amount as due in its balance sheet. It did not produce evidence of earlier objection to the debit notes or proof of payment. The Tribunal found the defence to be unsupported and categorized it as a moonshine dispute, insufficient to defeat the Section 9 application. [Paras 19, 20, 21]Defence of a genuine dispute rejected; dispute categorised as moonshine and not a bar to admission.Jurisdiction of the Adjudicating Authority - Tribunal has jurisdiction to entertain and try the application - HELD THAT: - The registered office of the Corporate Debtor is situated in Nagaur, Rajasthan. On that basis the Tribunal concluded that it has jurisdiction to entertain and try the Section 9 application. [Paras 22]Application held to be within the jurisdiction of this Tribunal.Appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Consequential directions on admission: appointment of IRP and invocation of moratorium - HELD THAT: - Upon admission of the Section 9 petition the Tribunal appointed the named Interim Resolution Professional registered with the IBBI and directed the Operational Creditor to deposit a sum towards the IRP's expenses. The moratorium envisaged under Section 14 of the IBC was declared effective during the CIRP and the IRP was directed to act in accordance with the Code and to issue the requisite public notices and call for claims. [Paras 24, 25]IRP appointed, moratorium invoked and directions issued for conduct of CIRP.Final Conclusion: The Section 9 application by the Operational Creditor is admitted: the Tribunal held the claim to be within limitation on account of acknowledgements, rejected the Corporate Debtor's contention of a genuine dispute as a moonshine defence, found no payment to the Applicant, declared jurisdiction, appointed the named Interim Resolution Professional and invoked the moratorium to commence the Corporate Insolvency Resolution Process. Issues Involved:1. Whether the Application is within the Law of LimitationRs.2. Whether there has been payment of the unpaid operational debtRs.3. Whether the dispute as raised by the corporate debtor is genuine or can be categorized as a moonshine disputeRs.Issue-wise Detailed Analysis:1. Whether the Application is within the Law of LimitationRs.The Corporate Debtor raised a preliminary objection of limitation, arguing that the debit notes fell due on 01.04.2013 and the confirmations of accounts were unauthorized. However, the Tribunal examined Section 18(1) of the Limitation Act, 1963, which provides that an acknowledgment of liability in writing before the expiration of the prescribed period resets the limitation period. The Tribunal found that the Corporate Debtor had acknowledged the debt through Confirmation of Accounts letters dated 01.04.2015, 01.04.2016, 01.04.2017, and 01.04.2018, which bore the stamp and signatures of authorized signatories. Thus, the Tribunal concluded that the Application was within the Law of Limitation.2. Whether there has been payment of the unpaid operational debtRs.The Tribunal noted that the Applicant was not a party to the Settlement Agreement dated 24.08.2018, and no proof of payment to the Applicant was submitted by the Corporate Debtor. The Tribunal also observed that previous applications dismissed as withdrawn were filed by Mr. Sanjay Bagrodia and not by the Applicant, and the subject matter of those applications was unrelated to the present case. Consequently, the Tribunal determined that there had been no payment of the unpaid operational debt.3. Whether the dispute as raised by the corporate debtor is genuine or can be categorized as a moonshine disputeRs.Section 5(6) of the Insolvency and Bankruptcy Code, 2016, defines 'dispute' and includes issues such as the existence of the debt, quality of goods or services, or breach of representation or warranty. The Tribunal found that the Corporate Debtor had acknowledged the debt through Confirmation of Accounts and admitted the debt in its Balance Sheet dated 31.03.2015. The Corporate Debtor did not produce evidence of disputing the debit notes before receiving the Section 8 notice. The Tribunal categorized the dispute raised by the Corporate Debtor as a moonshine dispute, lacking supporting evidence.Conclusion:The Tribunal admitted the application, concluding that the Applicant was entitled to claim its dues, establishing the default in payment of the operational debt beyond reasonable doubt. The Tribunal appointed Mr. Jai Narayan Khandelwal as the Interim Resolution Professional (IRP) and invoked a moratorium as per Section 14 of the IBC, 2016. The IRP was directed to carry out the Corporate Insolvency Resolution Process (CIRP) in compliance with the provisions of IBC, 2016. The Operational Creditor was instructed to deposit a sum of Rs. 2,00,000 to defray the IRP's expenses and fees. The Tribunal ordered the communication of this order to the relevant parties and the Insolvency and Bankruptcy Board of India (IBBI).