Appellate Tribunal voids insolvency order, cites pre-existing dispute. Emphasizes proof burden on Operational Creditor.

The Appellate Tribunal set aside the order initiating Corporate Insolvency Resolution Process against the Corporate Debtor, citing the existence of a pre-existing dispute that prevented invoking insolvency provisions. Disputes over payments to employees, dishonored cheques, and limitation periods were highlighted, with the Tribunal directing resolution by an appropriate forum. The Operational Creditor failed to prove the nature of payments, leading to the Tribunal emphasizing the onus of proof. Additionally, the Adjudicating Authority was directed to compensate the Insolvency Resolution Professional for incurred expenses.

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Issues Involved:
1. Existence of a dispute prior to the issuance of the demand notice under Section 8 of the I&B Code.
2. Payment of Rs. 14,17,000/- to the employees of the Operational Creditor and its treatment.
3. Dishonour of cheques issued by the Corporate Debtor.
4. Limitation period for the claim of the Operational Creditor.
5. Onus of proof regarding payments and out-of-pocket expenses.

Detailed Analysis:

1. Existence of a Dispute Prior to the Issuance of the Demand Notice:
The Appellant contended that there was a pre-existing dispute between the parties before the demand notice dated 22nd April 2019 was issued by the Operational Creditor. The Corporate Debtor had communicated multiple times, including emails and legal notices, indicating disputes over payments and requesting ledger books and bank statements. The Adjudicating Authority, however, concluded that the disputes raised were not real but spurious and did not fall under the ambit of Section 5(6) of the I&B Code. The Appellate Tribunal disagreed, highlighting that the existence of a dispute prior to the issuance of the demand notice was evident from the sequence of communications and legal notices exchanged between the parties.

2. Payment of Rs. 14,17,000/- to the Employees of the Operational Creditor:
The Corporate Debtor claimed to have paid Rs. 14,17,000/- to the employees of the Operational Creditor, which was not accounted for by the Operational Creditor. The Adjudicating Authority noted that the Operational Creditor admitted receiving this amount but claimed it was for out-of-pocket expenses. The Appellate Tribunal emphasized that the onus to prove whether the payment was for out-of-pocket expenses or main services lay on the Operational Creditor, which failed to provide such proof. The Tribunal concluded that the dispute over this payment existed and should be resolved by an appropriate forum.

3. Dishonour of Cheques Issued by the Corporate Debtor:
The Corporate Debtor issued cheques to the Operational Creditor, which were dishonoured due to insufficient funds and payment stopped by the drawer. The Appellant argued that these cheques were issued as security and not meant to be presented for payment. The Operational Creditor, however, presented the cheques, leading to their dishonour. The Tribunal noted that the dishonour of cheques and the subsequent legal notices indicated the existence of a dispute over payments.

4. Limitation Period for the Claim of the Operational Creditor:
The Appellant contended that a portion of the claim amounting to Rs. 8,68,478/- was barred by limitation as the defaults occurred more than three years before the institution of the Company Petition on 24th June 2019. The Adjudicating Authority did not address this contention adequately. The Tribunal emphasized the need to consider the limitation period while adjudicating such claims.

5. Onus of Proof Regarding Payments and Out-of-Pocket Expenses:
The Appellant argued that the Operational Creditor failed to provide ledger books and bank statements to reconcile accounts, thereby not proving that the payment of Rs. 14,17,000/- was for out-of-pocket expenses. The Tribunal agreed that the onus of proving the nature of the payment lay on the Operational Creditor, which did not meet this burden of proof.

Conclusion:
The Appellate Tribunal set aside the impugned order dated 13th February 2020, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Tribunal concluded that a pre-existing dispute existed, and the insolvency provisions could not be invoked. The matter of whether the payments were for out-of-pocket expenses or main services, and the dishonoured cheques, were deemed disputed questions of law and fact to be decided by an appropriate forum. The Tribunal also directed the Adjudicating Authority to compensate the Insolvency Resolution Professional for his remuneration and expenses incurred.

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