Tribunal rules demand draft not full settlement, admits insolvency application under Section 9

The tribunal found that the demand draft given by the Corporate Debtor was not towards full and final settlement of the entire claim but for a specific case. It was determined that there was no pre-existing dispute related to the operational debt, despite a winding-up petition being filed. The debt was not considered time-barred due to the exclusion of time spent in previous litigation. Consequently, the tribunal admitted the application under Section 9 of the Insolvency and Bankruptcy Code, initiating the Corporate Insolvency Resolution Process against the Corporate Debtor.

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Issues Involved:
1. Whether the demand draft dated 17.12.2015 given by the Corporate Debtor to the Operational Creditor was towards full and final settlement and now no debt is due and payable.
2. Whether there exists a dispute about the debt.
3. Whether the debt is time-barred.

Issue-wise Detailed Analysis:

1. Full and Final Settlement:
The Corporate Debtor contended that the demand draft of Rs. 2,11,575/- dated 17.12.2015 was towards full and final settlement of the debt. However, it was established that this amount was paid as a settlement for a specific case (CC No. 3389/2011) before Lok Adalat and not for the entire claim. The tribunal found it illogical that the Operational Creditor would settle a claim exceeding Rs. 29 Lakhs for merely Rs. 2,11,575/-. Thus, the tribunal concluded that the demand draft was not towards full and final settlement of the entire claim.

2. Existence of Dispute:
The Corporate Debtor argued that there was a pending dispute as a winding-up petition was filed by the Operational Creditor before the Calcutta High Court. The tribunal held that this did not constitute a pre-existing dispute related to the operational debt. The winding-up petition and the current application both stem from the Corporate Debtor's inability to pay the debt, and thus, the tribunal determined there was no pre-existing dispute.

3. Time-Barred Debt:
The Corporate Debtor asserted that the debt was time-barred as it became due in 2010-2011, and the present application was filed in 2019. However, the tribunal noted that the Operational Creditor had initially filed a winding-up petition in the Karnataka High Court immediately after the debt became due, which was dismissed in 2015 due to lack of territorial jurisdiction. The Operational Creditor then filed a fresh petition in the Calcutta High Court in 2016. The tribunal applied Section 14 of the Limitation Act, which allows exclusion of time spent in bona fide litigation in a wrong forum. Consequently, the tribunal concluded that the application was not time-barred.

Order:
The tribunal admitted the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. A moratorium was declared as per Sections 13 and 15 of the IBC, 2016, prohibiting the institution or continuation of suits, transferring of assets, and other specified actions against the Corporate Debtor. The tribunal appointed an Interim Resolution Professional (IRP) and directed the Operational Creditor to deposit Rs. 1,00,000/- for preliminary expenses. The IRP was instructed to conduct the CIRP in a time-bound manner, and the registry was directed to communicate the order to all concerned parties. The matter was listed for progress report filing on 30.04.2020.

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