2022 (10) TMI 871 - Tri - Insolvency and Bankruptcy

Application for Corporate Insolvency Rejected due to Failure to Meet Debt Threshold

The Tribunal dismissed the application for the initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy ... Operational debt and operational creditor under IBC - minimum financial threshold for initiation of CIRP - effect of suspension period under Section 10A on claim for interest - adjustment of part payments and proof of quantum of debt - tribunal not a court of recoveryEffect of suspension period under Section 10A on claim for interest - tribunal not a court of recovery - Claim for interest covering the IBC suspension period cannot be relied upon to trigger CIRP and the Tribunal will not compute or award interest as a recovery remedy in Section 9 proceedings. - HELD THAT: - The Bench examined the period for which interest is claimed and observed that the majority of that period falls within the statutory suspension period under Section 10A of the IBC (25.03.2020 to 24.03.2021). The Tribunal held that no CIRP can be initiated on interest accruing during the suspension period and therefore interest for that period cannot be used to trigger the insolvency process. Further, the Bench emphasised that the Tribunal is not a court of recovery and accordingly declined to undertake calculation of interest as a mode of relief in the Section 9 petition, limiting its role to adjudicating whether the threshold debt and default are established for initiation of CIRP. [Paras 9]Interest claimed for the suspension period under Section 10A is not available for triggering CIRP and the Tribunal will not compute interest as a recovery remedy in this proceeding.Operational debt and operational creditor under IBC - minimum financial threshold for initiation of CIRP - adjustment of part payments and proof of quantum of debt - Applicant failed to prove that the unpaid operational debt, after adjustment of part payments, exceeded the statutory minimum threshold required to initiate CIRP under Section 9. - HELD THAT: - The Bench scrutinised the account of part payments and their treatment by the applicant. While certain earlier part payments were shown adjusted against the disputed invoice, subsequent on account payments were allocated to a different invoice not pleaded or produced in the petition. The Tribunal found inconsistency and lack of documentary clarity in the manner of adjustment of payments and observed that had the later payments been applied to the invoice in dispute, the principal claim would fall below the statutory threshold of Rs. 1 crore. In consequence, the applicant failed to establish the quantum of unpaid operational debt beyond doubt and thereby did not satisfy the jurisdictional requirement for initiation of CIRP under Section 9. [Paras 11, 12, 13, 14]Failure to establish, with consistent documentary proof, that unpaid operational debt exceeds the minimum threshold; petition dismissed.Final Conclusion: The Section 9 petition is dismissed: interest claimed for the IBC suspension period cannot be relied upon to initiate CIRP and the applicant has not demonstrated, due to inconsistent adjustment of part payments, that the unpaid operational debt exceeds the statutory threshold required for initiation of CIRP. Issues:1. Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016.2. Claim of operational debt by the Applicant.3. Objections raised by the Respondent regarding the operational debt claimed.4. Adjustment of part-payments towards the outstanding dues.5. Consideration of interest during the suspension period of IBC.6. Compliance with terms and conditions of the Agreement between the parties.Analysis:1. The Applicant, M/s. Beetel Teletech Limited, filed a petition under Section 9 of the IBC seeking to initiate the Corporate Insolvency Resolution Process against the Respondent, M/s. Arcelia IT Services Private Limited, due to non-payment of operational debt amounting to Rs. 1,15,11,486/-, including the principal and interest. 2. The Applicant claimed that the Respondent failed to make payments as per the agreed terms, leading to the accumulation of the operational debt. The Respondent, however, contested the claim by raising objections, including questioning the Applicant's status as an operational creditor and disputing the validity of the debt claimed.3. The Respondent argued that the Applicant did not fulfill the delivery terms specified in the Purchase Order, resulting in non-acceptance of goods, and highlighted clauses from the Agreement regarding payment conditions based on complete consignment delivery. Additionally, the Respondent contended that the arbitration clause in the Agreement rendered the application non-maintainable.4. During the proceedings, discrepancies arose regarding the adjustment of part-payments towards the outstanding dues. The Respondent claimed that certain payments were not appropriately considered, leading to a reduction in the total outstanding amount. The Tribunal observed inconsistencies in the treatment of part-payments, affecting the calculation of the principal debt.5. The Tribunal scrutinized the claim for interest during the suspension period of the IBC, noting that no CIRP could be initiated during this period as per Section 10A. Consequently, the Tribunal concluded that no interest could be claimed for this period and emphasized that it is not a recovery court, refraining from calculating interest beyond the suspension period.6. Ultimately, the Tribunal dismissed the application, citing the Applicant's failure to establish the quantum of the unpaid operational debt above the minimum threshold of Rs. 1 crore conclusively. Further investigation and clarification regarding the adjustment of payments and invoices were deemed necessary for a more accurate determination of the outstanding dues.