2020 (9) TMI 1154 - 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 - The Respondent has addressed a letter dated 13.03.2018 to the Petitioner by inter-alia stating that due to some un-avoidable circumstances payments are delayed from their clients and funds flow was also not good since financial year ending promised to clear the dues within 30 days period. When the Respondent failed to honour their promise the Petitioner has issued demand Notice dated 04.10.2019 under the provisions of Code and thereafter the Respondent raised dispute vide their Reply dated 13.12.2019. The contentions raised in the Reply is totally contrary to their earlier letter dated 13.03.18 and these contentions/ allegations are not all tenable and they cannot constitute valid and legal dispute. Since the Respondent did not appear before the Adjudicating Authority the amount involved in the case is mere Rs. 4.35 lakhs and initiation of CIRP is not a solution for the Petitioner which is small entrepreneur and operational Creditor. Operational. And chances of getting dues of Operational Creditors are very less in comparisons to secured Creditors. Instead of keep the case pending for service of notice on the Respondent and getting their reply interest of both the parties would be met if the Petition is disposed of by directing the Respondent to settle the issue in question within a stipulated period - Petition disposed off.

Summary

Issues:
1. Initiation of Corporate Insolvency Resolution Process under Section 9 of the IBC, 2016.
2. Default in payment by the Corporate Debtor.
3. Dispute regarding outstanding payments.
4. Consideration of the operational cycle impact on the Operational Creditor.
5. Decision on the initiation of CIRP and settlement of the issue.

Issue 1: Initiation of Corporate Insolvency Resolution Process under Section 9 of the IBC, 2016:
The case involved a petition filed by M/S. Aster Technologies Private Limited seeking to initiate Corporate Insolvency Resolution Process (CIRP) against M/S. Solas Fire Safety Equipment Private Limited for defaulting on a payment of &8377; 4,35,487.50 along with interest. The petition was filed under Section 9 of the IBC, 2016.

Issue 2: Default in payment by the Corporate Debtor:
The Corporate Debtor failed to pay the balance amount despite multiple reminders and legal notices issued by the Operational Creditor. The Corporate Debtor acknowledged the debt but failed to clear the outstanding dues, causing financial strain on the Operational Creditor, impacting their operational cycle.

Issue 3: Dispute regarding outstanding payments:
The Corporate Debtor raised disputes regarding the outstanding payment, claiming delays in payments from their clients and financial constraints. However, the Adjudicating Authority found these contentions to be contradictory and untenable, especially since the Respondent did not appear before the Authority to present a valid legal dispute.

Issue 4: Consideration of the operational cycle impact on the Operational Creditor:
The Operational Creditor, being a small company, faced operational challenges due to the default committed by the Respondent, leading to the need for additional funds from other sources to sustain their business operations.

Issue 5: Decision on the initiation of CIRP and settlement of the issue:
The Tribunal, after considering the circumstances and the interests of both parties, decided not to initiate the Corporate Insolvency Resolution Process at the moment. Instead, the Respondent was directed to settle the outstanding issue within a stipulated period. The Tribunal aimed to provide an opportunity for an amicable resolution without passing an adverse order against the Respondent.

In conclusion, the Tribunal disposed of the petition by directing the Respondent to settle the outstanding issue within a specific timeframe. Failure to do so would allow the Petitioner to file a fresh Company Petition in accordance with the law, emphasizing the importance of resolving disputes amicably and considering the interests of both parties involved.