2021 (1) TMI 1191 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - fulfilment of conditions laid down under Section 10 of the Contract Act - HELD THAT - It is the duty of the Adjudicating Authority to decide in conformity with the pleadings and the proofs i.e. to say jus decere and non jus dare to administer the justice and not to make the law. It is well established rule of law that- all contracts and agreement but all agreements are not contract . This is so because for a contract to be valid it needs to fulfil all the essential ingredients mentioned under Section 10 of the Indian Contract Act 1872 (hereinafter referred to as Contract Act). Even if it is assumed that MoU fulfils all the ingredients of the Contract Act but in that case the MOU so relied upon by the petitioner is bad in the eye of law inasmuch as it does not fulfil the condition of Section 10 of the Contract Act as the date is not given and in number of places the vital information and details are blank as is apparent from page no 218 and 220 of the application (Exhibit-H). The enforceability of a MoU depends upon the principle governing legislation I.e. the Contract Act. The Petitioner admittedly has shown the date of default as the date of filing of the commercial suit number 782 of 2017 filed somewhere in July 2017 as reflected from Form I part IV at page no 6 of the Application. It is to be mentioned herein that the word Creditor Debt and default are used at many places in Insolvency Code and hence are very important. Default means non-payment of debt when whole or any part of instalment of the amount of debt has become due and payable and is not paid by the debtor or the Corporate Debtor as the case may be Section 3(12) of the IB Code. Therefore the date of filing of the commercial suit i.e. dated 12.07.2017 cannot be in any manner be called as date of default as per IB Code. Thus due to want of date of default the petition is bad in eye of law and not maintainable. On going through the records and documents produced by both the sides it is amply clear that the arrangement between the parties are in the nature of business sharing and there is no financial debt - the records show that even after receiving letter dated 03.06.2011(Letter of Intent) the petitioner has never raised any objection and has accepted and admitted the conditions drawn by the respondent. Under such circumstances even if we assume and consider the petitioner as financial creditor then even the claim so filed by the petitioner stands time barred. The Adjudicating Authority is of the considered view that the instant petition is not maintainable - Petition dismissed.

Summary

Issues Involved:
1. Validity and enforceability of the Memorandum of Understanding (MoU).
2. Determination of the petitioner as a financial creditor.
3. Date of default and limitation period.
4. Pre-existing disputes between the parties.
5. Admissibility of the petition under the Insolvency and Bankruptcy Code, 2016 (IBC).

Detailed Analysis:

1. Validity and Enforceability of the Memorandum of Understanding (MoU):
The claim is based on a MoU dated nil, which lacks vital information such as the date of execution, addresses of the parties, and cheque details. The MoU is considered a preliminary understanding and not legally binding unless it fulfills the conditions of a contract under Section 10 of the Indian Contract Act, 1872. The MoU in question does not meet these conditions, rendering it non-enforceable in the eyes of the law. The enforceability of a MoU depends on whether it creates a binding obligation, which this MoU does not.

2. Determination of the Petitioner as a Financial Creditor:
The petitioner claims to be a financial creditor based on a Letter of Intent dated 03.06.2011, which outlines the intention to provide marketing/financial assistance. However, this letter does not specify the disbursement of a loan or its terms. To be considered a financial creditor, the petitioner must prove that there was a financial debt and a default. The petitioner has failed to provide solid documents or information to support this claim, such as balance sheets or income tax returns showing the amount as a loan.

3. Date of Default and Limitation Period:
The petitioner has shown the date of default as the date of filing the commercial suit in July 2017. However, the date of default should be the date when the debt became due and payable but was not paid. The petition is considered time-barred since the Letter of Intent was executed on 03.06.2011, and no valid MoU was executed within 30 days as required. The absence of a clear date of default or due date makes the petition non-maintainable.

4. Pre-existing Disputes Between the Parties:
The records indicate that there is a pre-existing dispute between the parties, as evidenced by the pending Commercial Suit No. 782 of 2017 and the counterclaim filed by the respondent. The petitioner has sought an injunction in the commercial suit, and the respondent has raised objections, including a counterclaim of Rs. 8500 crores. This pre-existing dispute further complicates the petition under the IBC.

5. Admissibility of the Petition under the Insolvency and Bankruptcy Code, 2016:
The petition is found to be non-maintainable due to several reasons:
- The MoU lacks essential details and is not enforceable.
- The petitioner does not qualify as a financial creditor.
- The petition is time-barred.
- There are pre-existing disputes between the parties.

Conclusion:
The petition is dismissed as it is not maintainable under the Insolvency and Bankruptcy Code, 2016. The petitioner is advised to approach the appropriate forum to enforce its claim against the respondent. The decision is based on the lack of enforceability of the MoU, the non-qualification of the petitioner as a financial creditor, the time-barred nature of the claim, and the existence of pre-existing disputes.