2022 (2) TMI 144 - Tri - Insolvency and Bankruptcy

Tribunal initiates Corporate Insolvency Resolution Process under Section 9

The tribunal admitted the application under Section 9 of the Insolvency and Bankruptcy Code, initiating the Corporate Insolvency Resolution Process (CIRP) ... Pre-existing dispute - existence of dispute test under Mobilox - default and operational debt - admission of application under Section 9 of the IBC, 2016 - initiation of corporate insolvency resolution process - moratorium under Section 14 of the IBC, 2016 - appointment of Interim Resolution ProfessionalPre-existing dispute - existence of dispute test under Mobilox - The corporate debtor has not established any pre-existing dispute such as would preclude admission of the Section 9 application. - HELD THAT: - The Tribunal examined the corporate debtor's plea of prior dispute relating to alleged discrepancies in log books, monthly reports and falsified invoices and found no documentary communication predating the demand notice to substantiate a 'pre-existing dispute'. Applying the test in Mobilox, the adjudicating authority considered whether the dispute, as pleaded, disclosed a plausible contention requiring further investigation. The corporate debtor failed to place any substantive evidence of a dispute prior to the demand notice; its assertions were held to be unsupported and thus amounted to an impermissible attempt to create a 'moonshine' dispute. [Paras 11, 13, 14]The contention of a pre-existing dispute is rejected and held to be unsustainable.Default and operational debt - admission of application under Section 9 of the IBC, 2016 - initiation of corporate insolvency resolution process - The Section 9 application was complete, a default of over the prescribed threshold existed, and the application is admitted initiating the CIRP. - HELD THAT: - The Tribunal found that the applicant had placed relevant documents including invoices, ledger and a dishonoured cheque evidencing part payment and admission of liability. The unpaid operational debt exceeded the statutory threshold and the claim related to services provided within the limitation period. Relying on the statutory scheme and jurisprudence recognizing default upon non-payment, the Tribunal held the application to be complete under the prescribed form and admitted it under Section 9(5), thereby triggering the corporate insolvency resolution process. [Paras 12, 15, 16, 17, 18]Application under Section 9 is admitted and CIRP is initiated.Moratorium under Section 14 of the IBC, 2016 - appointment of Interim Resolution Professional - Moratorium is declared and an Interim Resolution Professional is appointed with directions for deposits and consequential actions. - HELD THAT: - Consequent to admission, the Tribunal declared the moratorium and specified the statutory prohibitions that follow. As the applicant had not proposed an IRP, the Tribunal appointed an Interim Resolution Professional subject to standard conditions and directed him to undertake duties under the Code. The operational creditor was directed to deposit an interim amount to meet IRP's expenses, subject to adjustment by the Committee of Creditors. Administrative directions were given for service of the order, supply of records to the IRP, and intimation to the IBBI and ROC. [Paras 18, 19, 20, 21]Moratorium imposed; IRP appointed and procedural directions (including deposit by operational creditor) issued.Final Conclusion: The Tribunal rejected the corporate debtor's plea of a pre-existing dispute, held the Section 9 application to be complete and arising from an admitted default above the statutory threshold, admitted the application, initiated CIRP, imposed the moratorium and appointed an Interim Resolution Professional with attendant administrative directions. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.2. Pre-existing dispute regarding invoices and log books.3. Breach of contract by the applicant.4. Admissibility of evidence and compliance with procedural requirements.Issue-wise Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP):M/s. Reach International (Applicant/Operational Creditor) filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s. Altech Infrastructure Private Limited (Corporate Debtor). The application was filed due to non-payment of dues for industrial machines leased out by the applicant to the corporate debtor. The tribunal noted that the application was complete and met the requirements under the IBC, thus initiating the CIRP and declaring a moratorium in terms of Section 14 of the Code.2. Pre-existing Dispute Regarding Invoices and Log Books:The Corporate Debtor contended that there were pre-existing disputes regarding discrepancies in the log books and invoices, including overwriting and inflated work hours. However, the tribunal found that the Corporate Debtor failed to provide any substantive evidence of such disputes prior to the issuance of the demand notice. The tribunal referred to the Supreme Court's decision in 'Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited', emphasizing that a dispute must be genuine and supported by evidence. The tribunal concluded that the Corporate Debtor's claims were unsupported and constituted a 'moonshine dispute.'3. Breach of Contract by the Applicant:The Corporate Debtor argued that the applicant breached the contract by not adhering to the agreed terms, such as providing log books and monthly reports, and raising invoices for non-operational periods. The tribunal noted that the Corporate Debtor acknowledged the invoices in an email dated 12.11.2018 and issued a cheque for part payment, which was dishonored. This acknowledgment and the dishonored cheque were seen as admissions of liability, undermining the Corporate Debtor's claims of breach of contract.4. Admissibility of Evidence and Compliance with Procedural Requirements:The Corporate Debtor raised objections regarding the admissibility of evidence and procedural compliance, including the completeness of the application, the authorization of the person filing the application, and the validity of the affidavit under Section 65B of the Evidence Act. The tribunal found that the application was filed in the prescribed form and was complete. The tribunal also noted that the Corporate Debtor's repeated attempts to settle the matter indicated an admission of unpaid operational debt.Conclusion:The tribunal admitted the application under Section 9 of the IBC, initiating the CIRP and declaring a moratorium. Mr. Vinod Kumar Chaurasia was appointed as the Interim Resolution Professional (IRP). The Operational Creditor was directed to deposit Rs. Two Lakh with the IRP to cover expenses. The tribunal's decision was communicated to the relevant parties and authorities for compliance and record-keeping.