Tribunal voids CIRP order under Insolvency Code, faults creditor for non-disclosure. Heavy costs imposed.

The Tribunal set aside the order admitting the application under Section 9 of the Insolvency and Bankruptcy Code against the corporate debtor, citing the existence of pre-existing disputes that were not disclosed. The Tribunal found fault with the conduct of the operational creditor and its representative for failing to disclose crucial correspondence showing disputes. Consequently, the Corporate Insolvency Resolution Process was quashed, and heavy costs were imposed on the operational creditor and its representative. The corporate debtor was released from the CIRP, with assets and records to be returned, and costs totaling Rs. 7,50,000 imposed on the operational creditor and its representative.

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Issues Involved:
1. Admission of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC).
2. Existence of pre-existing disputes between the operational creditor and the corporate debtor.
3. Service of notice under Section 8 and Section 9 of the IBC.
4. Conduct of the operational creditor and its authorized representative during the proceedings.

Issue-wise Detailed Analysis:

1. Admission of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC):
The operational creditor filed an application under Section 9 of the IBC against the corporate debtor, which was admitted by the Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench) on July 26, 2019. The application was based on an alleged default in payment of Rs. 2,82,48,963 along with interest. The Adjudicating Authority directed the operational creditor to reconcile the amount of the invoices and subsequently proceeded ex parte against the corporate debtor, initiating the corporate insolvency resolution process (CIRP).

2. Existence of pre-existing disputes between the operational creditor and the corporate debtor:
The appellant argued that there were serious disputes regarding the installation, commissioning, and maintenance of the solar power project. The appellant presented numerous documents and e-mails exchanged between the parties, evidencing these disputes. The operational creditor had suppressed this correspondence, which showed pre-existing disputes, from the Adjudicating Authority. The Tribunal found that there was indeed voluminous evidence of pre-existing disputes, which should have led to the rejection of the Section 9 application.

3. Service of notice under Section 8 and Section 9 of the IBC:
The appellant contended that the Section 8 notice was not sent to the registered office of the corporate debtor but to another address and the e-mail address of the then director. The operational creditor did not serve the petition and paper book on the said e-mail address. The Tribunal noted that the operational creditor served papers on the registered address, which was no longer under the control of the corporate debtor. The Tribunal did not find it necessary to deliberate on the grievances regarding the manner of service of notices, considering the voluminous records showing pre-existing disputes.

4. Conduct of the operational creditor and its authorized representative during the proceedings:
The Tribunal found fault with the affidavit filed by the authorized representative of the operational creditor, Mr. Rahul Gupta, who avoided placing on record the correspondence showing pre-existing disputes by claiming that the communication was "presently not retrievable." The Tribunal emphasized that starting the CIRP against a functional company is a serious matter and parties cannot be allowed to play hide and seek. Consequently, the Tribunal imposed heavy costs on the operational creditor and Mr. Rahul Gupta for their conduct.

Judgment:
The Tribunal set aside the impugned order dated July 26, 2019, quashing the initiation of the CIRP against the corporate debtor. All steps taken in consequence of the impugned order and further orders passed during the CIRP were also quashed and set aside. The corporate debtor was released from the rigour of the CIRP, and the interim resolution professional was directed to hand over the assets and records to the corporate debtor/promoter/board of directors. Costs of Rs. 5 lakhs were imposed on the operational creditor, and Rs. 2,50,000 on Mr. Rahul Gupta, to be paid from his personal account to the corporate debtor.

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