2020 (1) TMI 1248 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - There is no such clause that the corporate debtor is liable to pay/compensate for the loss caused to the petitioner. Moreover if at all there was any loss to the petitioner out of the MOU then why the petitioner waited so long i.e. from 14.01.2016 till filing of the application. Admittedly the instant dispute arises out of breach of contract i.e. MOU dated 15.01.2015 as alleged by the petitioner - Admittedly the petitioner used to purchase the material by paying an advance amount for the goods he is supposed to receive from the corporate debtor and thereafter reimbursement was made as per the MOU. The debt can be considered as an operational debt provided the claim arises out of the provisions 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 either the Central Government any State Government or any Local Authority - there is no relation of operational creditor and corporate debtor. Operational creditor never supplied any goods and/or rendered services to the corporate debtor. However the instant case is arising out of breach of MOU and certain promises made by the respondent. Even as per the MOU which has been entered between the parties only reflects the arrangement for selling of the goods by the applicant and certain percentages are fixed as reflected from Clause 7 of the MOU dated 15.01.2015 under the head Marketing (Page 61-64) which is self-explanatory - Under the circumstances there is a breach of the said MOU which the petitioner entered with the respondent for getting certain benefit on the sale of the products. The scheme of the code is to ensure that when a default takes place that is when the debt become due and if not paid the Insolvency Resolution Process begins. The default is also defined in section 3(12) i.e. default means non-payment of debt when whole or any part or an instalment or an amount of debt has become due and payable and if not repaid by the debtor or the Corporate debtor as the case may be . The Adjudicating Authority is not convinced that there exist between the Petitioner and the Respondent a relationship of an Operational Creditor and Corporate Debtor and that there is an Operational Debt of which a default has been committed and/or occurred - petition dismissed without costs.

Summary

Issues Involved:
1. Maintainability of the application due to alleged prior dispute.
2. Legitimacy of debit notes raised by the petitioner.
3. Existence of debt acknowledgment by the corporate debtor.
4. Classification of the petitioner as an operational creditor under the Insolvency and Bankruptcy Code, 2016 (IBC).

Issue-wise Detailed Analysis:

1. Maintainability of the Application Due to Alleged Prior Dispute:
The respondent/corporate debtor argued that the application is not maintainable due to an existing prior dispute between the parties. The tribunal examined the Memorandum of Understanding (MoU) dated 15.01.2015, which was terminated on 14.01.2016. The tribunal found that the dispute arose from an alleged breach of the MoU. The tribunal noted that if there was any loss to the petitioner due to the MoU, the petitioner should have acted sooner rather than waiting from 14.01.2016 until the filing of the application.

2. Legitimacy of Debit Notes Raised by the Petitioner:
The respondent contested the validity of the debit notes raised by the petitioner, claiming they were untenable and illegal. The tribunal reviewed Clause 7 of the MoU, which stipulated that marketing costs incurred by the petitioner would be reimbursed by the corporate debtor upon submission of debit notes with supporting documents. The tribunal found that the petitioner had complied with this clause and submitted the necessary documentation.

3. Existence of Debt Acknowledgment by the Corporate Debtor:
The respondent denied any acceptance or admission of the debt claimed by the petitioner. However, the tribunal noted that the corporate debtor had acknowledged the debit notes and agreed to transfer AED 45,000 to the petitioner, indicating an acknowledgment of some debt. Despite this, the tribunal emphasized that the main issue was whether this acknowledgment constituted an operational debt under the IBC.

4. Classification of the Petitioner as an Operational Creditor Under the IBC:
The tribunal analyzed the definitions of "creditors," "operational creditor," and "operational debt" under Sections 3(10), 5(20), and 5(21) of the IBC. It concluded that the debt could only be considered an "operational debt" if it arose from the provision of goods or services, including employment or repayment of dues to the government. The tribunal found that the petitioner did not supply any goods or services to the corporate debtor but rather had a marketing arrangement under the MoU. Therefore, the tribunal determined that the petitioner did not qualify as an operational creditor under the IBC.

Conclusion:
The tribunal dismissed the petition, stating that there was no relationship of an operational creditor and corporate debtor between the petitioner and the respondent. The tribunal held that the claim arose from a breach of the MoU and not from the provision of goods or services. Consequently, the petition was dismissed on the grounds of maintainability under the IBC. However, the tribunal noted that the petitioner could seek recourse before another competent forum to enforce its claim.