2021 (10) TMI 595 - Tri - Insolvency and Bankruptcy

Court dismisses petition by South Delhi Municipal Corp against MEP Infrastructure Developers Ltd under Insolvency and Bankruptcy Code.

South Delhi Municipal Corporation Versus MEP Infrastructure Developers Limited

The Bench dismissed the petition filed by South Delhi Municipal Corporation against MEP Infrastructure Developers Ltd. under Section 9 of the Insolvency ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational debt or not - power of toll collection - Section 113 of the Delhi municipal Corporation Act, 1957 - existence of debt and dispute or not - HELD THAT:- Under this Agreement, toll taxes are to be collected by the Respondents from commercial vehicles entering Delhi from the 124 toll points around Delhi. This debt arises under a contract. The total amount under this contract is for a period of 5 years. The operational debt claimed by the Petitioner under Part-IV of Form 5 of the Petition is about ₹ 788,45,20,136/-. The Bench notes that it has to be demonstrated by the Petitioner that the claim is an operational debt as defined in Section 5(21) “5(21) “operational debt” means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority;” - it is clear to the Bench that Petitioner is not providing any goods or services to the Respondent and to that extent is not covered under the definition of Operational Debt u/s 5(21). The Bench is also of the view that the word “recoverable from any person from whom such sum is due as an arrear of tax under this Act” introduces deeming fiction that the dues can be recovered as an arrear of tax to take benefit of the machinery under the DMC Act. However, this does not make a contractual due which is the case in the instant matter, as a due converted into a tax. The distinction remains between (a) dues which are recoverable as arrears of tax, and (b) dues which are tax, arising under the statute. The Bench is of the view that, what is covered under Section 5(21) is the dues which are arising under the statute and not dues which are recoverable as arrears of tax. Pre-existing disputes or not - HELD THAT:- The Bench notes that there are pre-existing ongoing disputes between the Petitioner and the Respondent pending before the Hon'ble High Court at Delhi in which there are several interim orders are currently under operation. There are multiple proceedings filed by both the Petitioner and the Applicant which points towards the fact that there are pre-existing disputes which have arisen between the parties and such disputes are to be adjudicated in a Civil Court or any other forum - Even if there is nascent cross-claim on substantial grounds the same is sufficient to dismiss the Petition of any Operational Creditor. The Bench has no doubt in its mind that this Petition filed u/s 9 deserves “dismissal” - Petition dismissed. Issues Involved:1. Whether the amount claimed by the Petitioner qualifies as an 'operational debt' under the Insolvency and Bankruptcy Code (IBC), 2016.2. Whether the claim is a crystallized and undisputed sum.3. Pre-existing disputes between the parties.Detailed Analysis:1. Qualification of the Amount as 'Operational Debt':The Petitioner, South Delhi Municipal Corporation (SDMC), filed a petition under Section 9 of the IBC, 2016, against MEP Infrastructure Developers Ltd. (MEPL) for initiating Corporate Insolvency Resolution Process (CIRP) for an amount of Rs. 788,45,20,136/-. The claim arises from a Toll Tax Collection Agreement where MEPL was appointed to collect toll taxes from commercial vehicles entering Delhi. The Petitioner argued that the debt falls under 'operational debt' as defined in Section 5(21) of the IBC, which includes claims for the provision of goods or services or dues arising under any law and payable to the government or local authority.The Bench noted that the Petitioner did not provide any goods or services to the Respondent, and the dues claimed were not taxes but contractual dues recoverable as arrears of tax under Section 455 of the Delhi Municipal Corporation Act (DMC Act). The Bench distinguished between dues recoverable as arrears of tax and dues that are taxes arising under a statute. It concluded that the Petitioner's claim did not meet the criteria of 'operational debt' under Section 5(21) of the IBC.2. Crystallized and Undisputed Sum:The Bench examined whether the claim was a crystallized and undisputed sum. The Petitioner argued that the debt was undisputed and arose from the contract. However, the Respondent contended that there were pre-existing disputes regarding the contractual dues, penalties, and other charges, which were subject to ongoing litigation in various courts, including the Delhi High Court. The Bench noted that several interim orders were passed by the Delhi High Court, indicating ongoing disputes between the parties. Therefore, the Bench found that the claim was not a crystallized and undisputed sum.3. Pre-existing Disputes:The Bench referred to the Hon'ble Supreme Court's judgments in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited and Kay Bouvet Engineering Ltd. vs. Overseas Infrastructure Alliance (India) Private Limited, which emphasized that the existence of a plausible contention requiring further investigation or a genuine dispute is sufficient to dismiss a petition under Section 9 of the IBC. The Bench observed that there were multiple proceedings and interim orders indicating serious disputes between the parties, which needed to be adjudicated in a civil court or other appropriate forum.The Bench also referred to the Delhi High Court's observations in its orders dated 06.11.2020 and 09.04.2021, which highlighted the need for the parties to resolve their disputes in appropriate civil proceedings. The Bench concluded that the existence of pre-existing disputes warranted the dismissal of the petition under Section 9 of the IBC.Conclusion:Based on the analysis, the Bench dismissed the petition CP No. 246 of 2021 filed under Section 9 of the IBC, 2016, by the South Delhi Municipal Corporation against MEP Infrastructure Developers Ltd. Consequently, the Interlocutory Application No. 1670 of 2021 filed by the Respondent challenging the maintainability of the petition was allowed.