Tribunal confirms Corporate Debtor's default on operational debt, dismisses appeal

The Tribunal upheld the National Company Law Tribunal's decision to admit the Section 9 application against the Corporate Debtor, finding no legal infirmities in the order. The Tribunal dismissed the appeal, confirming the Corporate Debtor's default on an operational debt of Rs. 61,24,637/-. The fabricated pre-existing dispute and lack of evidence for alleged payments and settlement led to the dismissal. The intervenors' plea was rejected, advising them to seek relief through the Resolution Professional or Competent Forum. The Resolution Professional was authorized to claim fees and expenses from the Corporate Insolvency Resolution Process.

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Issues Involved:
1. Admission of Section 9 application.
2. Existence of pre-existing dispute.
3. Service of Demand Notice.
4. Validity of payments and alleged full and final settlement.
5. Dishonour of cheques and related proceedings.
6. Claims and expenses in Corporate Insolvency Resolution Process (CIRP).
7. Rights and grievances of Home Buyers and Financial Creditors.

Detailed Analysis:

1. Admission of Section 9 Application:
The National Company Law Tribunal (NCLT) admitted the Section 9 application filed by the Operational Creditor against the Corporate Debtor. The Tribunal observed that the Corporate Debtor had procured goods from the Operational Creditor, acknowledged receipt, and defaulted on payment of Rs. 61,24,637/-. This constituted an operational debt under Section 5(21) of the Insolvency and Bankruptcy Code (IBC).

2. Existence of Pre-existing Dispute:
The Appellant argued that there was a pre-existing dispute regarding the quality of goods supplied, evidenced by letters dated 2.7.2016, 27.7.2016, 25.08.2016, and 27.01.2017. However, the Tribunal found these letters to be fabricated and created solely for the purpose of the case. The Operational Creditor had not raised any dispute regarding the materials for over nine months, indicating that the dispute was concocted.

3. Service of Demand Notice:
The Appellant contended that the Demand Notice under Section 8 was not properly served. The Tribunal, however, held that the notice was deemed to be properly served as it was tendered by the postman but refused by the Corporate Debtor. The Tribunal referred to the Supreme Court's decision in Gujarat Electricity Board vs. Atmaram Sungomal Poshani, which establishes that refusal to accept notice constitutes proper service.

4. Validity of Payments and Alleged Full and Final Settlement:
The Appellant claimed that payments amounting to Rs. 4,51,84,594/- had been made, and a full and final settlement of Rs. 12 lakhs was completed on 17.5.2017. The Tribunal found no substantial evidence to support this claim and noted that the issuance of cheques amounting to Rs. 6 lakhs on 22.11.2018 contradicted the claim of full and final settlement.

5. Dishonour of Cheques and Related Proceedings:
The Operational Creditor initiated proceedings under Section 138 of the Negotiable Instruments Act, 1881, due to the dishonour of three cheques amounting to Rs. 6 lakhs. The Appellant's claim that these cheques were for another project was not substantiated.

6. Claims and Expenses in CIRP:
The Interim Resolution Professional (IRP) verified claims amounting to Rs. 24,37,11,263/- from Financial Creditors and Operational Creditors. The IRP incurred expenses of Rs. 6,98,007/- for conducting the CIRP. The suspended Board of Directors failed to provide requisite information, hindering the resolution process.

7. Rights and Grievances of Home Buyers and Financial Creditors:
Intervenors, who were Home Buyers and Financial Creditors, sought to implead themselves, arguing that their interests would be impaired. The Tribunal referred to its earlier decision in Flat Buyers Association Winter Hills – 77, Gurgaon vs. Umang Realtech Pvt. Ltd., emphasizing that CIRP should be project-specific. The intervenors were advised to seek relief from the Resolution Professional or Competent Forum.

Conclusion:
The Tribunal dismissed the appeal, upholding the NCLT's decision to admit the Section 9 application. The Tribunal found no legal infirmities in the NCLT's order, confirming that the Corporate Debtor had committed a default. The intervenors' application was not entertained, and they were directed to seek recourse before the Resolution Professional or Competent Forum. The Resolution Professional was permitted to claim fees and expenses incurred during the CIRP.

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