Tribunal overturns dismissal of Insolvency Code application, orders payment to creditor within 30 days

The Tribunal set aside the Adjudicating Authority's dismissal of the Section 9 application under the Insolvency and Bankruptcy Code. It directed the Corporate Debtor to release Rs.12,72,741.74 to the Operational Creditor within 30 days, warning that failure to comply would lead to commencement of Corporate Insolvency Resolution Process (CIRP). If the Operational Creditor declines the payment, the Section 9 petition would be dismissed. No costs were awarded.

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Issues Involved:
1. Existence of Operational Debt
2. Admittance and Default of Debt
3. Dispute Prior to Demand Notice
4. Malafide Intentions and Genuine Resolution

Summary:

Existence of Operational Debt:
The appeal arises from the dismissal of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) by the Adjudicating Authority (NCLT, Special Bench, New Delhi). The Operational Creditor (Appellant) had entered into a Memorandum of Understanding (MoU) with the Corporate Debtor (Respondent) to act as an exclusive real estate agent. The Operational Creditor raised invoices for brokering commissions, which the Corporate Debtor stopped paying from 10.10.2018. The Operational Creditor sent a Demand Notice under Section 8 of IBC on 27.03.2019 for Rs.14,70,943.90, which the Corporate Debtor disputed.

Admittance and Default of Debt:
The Corporate Debtor admitted a liability of Rs.4,64,852.80 and Rs.6,35,978.98, aggregating to Rs.11,00,831.78. The Corporate Debtor also admitted issuing cheques of Rs.4,32,668.74 and Rs.8,40,073/- towards the outstanding payment. The Appellant claimed the total outstanding amount including interest to be Rs.27,70,574/- as on 16.09.2022. The Adjudicating Authority dismissed the Section 9 application, stating that the Operational Creditor approached with malafide intentions and was unwilling to accept the amounts offered by the Corporate Debtor.

Dispute Prior to Demand Notice:
The Corporate Debtor argued that the brokerage claimed was not payable due to various reasons, including cancellations by allottees and premature billing. The Corporate Debtor contended that the MoU had expired and that the invoices raised post-31.12.2018 were not legitimate. However, the records showed no material evidence of disputes raised prior to the demand notice.

Malafide Intentions and Genuine Resolution:
The Adjudicating Authority concluded that the Operational Creditor had malafide intentions, as they refused to accept the cheque payments and were not genuinely seeking resolution. The Tribunal, however, found that the Corporate Debtor had admitted the operational debt and defaulted in payment. The Tribunal noted that the Adjudicating Authority failed to appreciate the evidence of admitted liabilities and the absence of disputes prior to the demand notice.

Conclusion:
The Tribunal set aside the impugned order, directing the Corporate Debtor to release Rs.12,72,741.74 by way of Demand Draft within 30 days, failing which CIRP would commence. If the Operational Creditor refuses the payment, the Section 9 petition would become infructuous and be dismissed. No order as to costs was made.

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