2020 (12) TMI 368 - Tri - Insolvency and Bankruptcy

Tribunal admits insolvency application despite Corporate Debtor's objections

The Tribunal found the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 maintainable despite objections raised by the Corporate ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation - HELD THAT:- The corporate debtor has tried to create and establish a preexisting dispute by asserting that the services had never been performed. Further, the corporate debtor has also raised contentions with regards to maintainability of the present application and sufficient proof to substantiate the contentions have not been provided. No documentary evidence or correspondence is placed on record by the corporate debtor to support the contentions, that there is a pre-existing dispute and the said dispute was raised for the first time only after notice under Section 8 of IBC was issued. In reply the various objections raised are mere statements made by Corporate Debtor which has not been substantiated with any proof. It is clear that such notice must bring to the notice of operational creditor the 'existence' of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which required further investigation and that the 'dispute' is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster.' The dispute raised by the corporate debtor, is spurious, plainly frivolous and unable to categorize as genuine dispute as reproduced above. Hence, contention of the corporate debtor, of a pre existing dispute without any evidence and merit is a clear after thought to defeat the claim of the applicant - The date of default is 11.09.2019 and the present application is filed on 09.10.2019. Hence the application is not time barred and filed within the period of limitation. The Applicant has filed an affidavit in compliance of section 9(3)(b) which is placed on record - The present application is filed on the Performa prescribed under Rule 6 of the Insolvency and Bankruptcy Code, 2016 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 r/w Section 9 of the code and is complete. The applicant is entitled to claim its dues, establishing the default in payment of the operational debt. The application is admitted - Moratorium declared. Issues:1. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.2. Dispute regarding the operational debt and the alleged default in payment.3. Jurisdiction of the Tribunal to entertain the application.4. Appointment of Interim Resolution Professional and initiation of moratorium period.5. Direction for the applicant to deposit a sum with the Interim Resolution Professional.Analysis:1. Maintainability of the Application:The Applicant, a private limited company, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor, a real estate business entity. The Corporate Debtor raised objections regarding the maintainability of the application, disputing the nature of the work contract and the compliance with serving the demand notice. However, the Tribunal found that the objections raised lacked merit as the Applicant had provided evidence of work done, invoices raised, and communication regarding the outstanding payment. The Tribunal overruled the objections and admitted the application.2. Dispute and Default in Payment:The Corporate Debtor claimed that no operational debt was due as the work was not completed as per the agreement, leading to a loss incurred by the Corporate Debtor. However, the Applicant presented ledger accounts, measurement bills, and communication records to prove the completion of work. The Tribunal noted that the Corporate Debtor failed to provide substantial evidence of a genuine dispute and that the objections raised were unsubstantiated. The Tribunal concluded that the default in payment of operational debt was evident, and the dispute raised by the Corporate Debtor was deemed spurious.3. Jurisdiction of the Tribunal:The Tribunal established its jurisdiction to entertain the application based on the location of the Corporate Debtor's registered office in Delhi. This allowed the Tribunal to proceed with the case and make decisions regarding the insolvency process.4. Appointment of Interim Resolution Professional and Moratorium:Upon admitting the application, the Tribunal appointed an Interim Resolution Professional and initiated a moratorium period as per the provisions of the Insolvency and Bankruptcy Code, 2016. The Tribunal directed the Applicant to deposit a sum with the Interim Resolution Professional to cover expenses and functions during the resolution process.5. Direction for Deposit and Communication:The Tribunal directed the Applicant to deposit a specified amount with the Interim Resolution Professional and communicated the order to all relevant parties, including the Applicant, Corporate Debtor, and the appointed IRP. Additionally, the order was forwarded to regulatory bodies for compliance and updating of records.In conclusion, the Tribunal admitted the application, appointed an IRP, initiated a moratorium period, and directed the Applicant to deposit a sum for the resolution process, based on the evidence presented and the lack of substantiated disputes raised by the Corporate Debtor.