2022 (10) TMI 585 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - pre-existing disputes between the parties or not - HELD THAT - There is a dispute even before the issuance of the Demand notice dated 29.03.2019. The Corporate Debtor had Terminated the Work Order between the parties via letter dated 12.12.2018 which is also prior to the said Demand Notice. Thus upon perusing the above e-mails this Bench notes that both parties are in loggerheads much prior to issuing the Demand Notice. Hon ble Supreme Court in Mobilox Innovations Private Limited Versus Kirusa Software Private Limited 2017 (9) TMI 1270 - SUPREME COURT the Supreme Court clearly held that what the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the dispute is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster - So long as a dispute truly exits in fact and is not spurious hypothetical or illusory the adjudicating authority has to reject the application. This Bench has no option except to hold that there are Pre-existing disputes between the parties and there is no merit in the Company Petition and the Company Petition deserves to be dismissed - Petition dismissed.

Summary

Issues Involved:
1. Whether there are pre-existing disputes between the parties?

Detailed Analysis:

Issue 1: Whether there are pre-existing disputes between the parties?

1. Background and Claims by Operational Creditor:
- The Operational Creditor, M/s. Monolith Industries Limited, filed a petition to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, M/s. Larsen and Toubro Limited, under Section 9 of the Insolvency and Bankruptcy Code (IBC), seeking resolution of an unresolved operational debt of Rs. 19,54,556.60.
- The Operational Creditor was engaged in construction works, while the Corporate Debtor was involved in engineering, construction, manufacturing, and financial services.
- The Operational Creditor cited a Letter of Intent dated 05.05.2017 and a Work Order dated 07.07.2017 for construction projects, including Elevated Service Reservoirs (ESR) at various sites.
- The Operational Creditor raised invoices for the work done, but claimed that certain amounts remained unpaid after deductions for TDS and retention money.

2. Contentions by Corporate Debtor:
- The Corporate Debtor opposed the petition, highlighting pre-existing disputes between the parties.
- They argued that the Operational Creditor failed to perform obligations under the subcontract, despite several notifications via emails.
- The Corporate Debtor provided detailed deductions and payments made, asserting that the amounts claimed by the Operational Creditor were already settled.
- They also pointed out additional costs incurred due to defective work and delays caused by the Operational Creditor, leading to termination of the Work Order.

3. Evidence of Pre-Existing Disputes:
- The Corporate Debtor annexed several emails to substantiate the existence of disputes before the issuance of the Demand Notice dated 29.03.2019.
- Emails dated 10.05.2018, 09.10.2018, 04.01.2018, 02.11.2018, and 12.12.2018 highlighted issues such as slow progress, poor workmanship, and inadequate manpower, leading to termination of the Work Order on 12.12.2018, prior to the Demand Notice.

4. Legal Precedents:
- The Tribunal referred to the Supreme Court judgment in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, which emphasized that the adjudicating authority must ascertain whether a "dispute" exists and is not a spurious, hypothetical, or illusory argument.
- Another precedent cited was M/s. S. S. Engineers vs. Hindustan Petroleum Corporation Ltd., where the Supreme Court held that if the debt is disputed, the application for CIRP must be dismissed, as the IBC is not meant to penalize solvent companies for non-payment of disputed dues.

5. Tribunal's Conclusion:
- The Tribunal found that there were clear pre-existing disputes between the parties, as evidenced by the emails and the termination of the Work Order before the Demand Notice.
- Applying the legal principles from the Supreme Court judgments, the Tribunal concluded that the petition deserved to be dismissed on the grounds of "pre-existing disputes" and the "pendency of suit."
- The Tribunal refrained from commenting on the merits of the pending civil suit between the parties.

6. Final Order:
- The Company Petition was dismissed on the grounds of "pre-existing disputes" between the parties.

This detailed analysis preserves the legal terminology and significant phrases from the original text, providing a comprehensive understanding of the judgment while maintaining privacy and clarity.