2018 (7) TMI 2237 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT - On careful perusal of the documents it is noticed that the Invoice raised by the Operational Creditor has never been acknowledged by the Debtor - there is nothing on record which can prove that the Operational Creditor was enraged by the Debtor for providing Legal services except the averment made by the Operational Creditor. The Operational Creditor has not produced any Vakalatnama/Memo of Appearance by which the Operational Creditor has appeared before Court of Law on behalf of Debtor. Though it is accepted position that the Operational Creditor was engaged by the Debtor for his Legal services it is crystal clear that for the services provided from Aug. 2005 to Jan. 2011 the Operational Creditor has duly received the fixed Professional Fees by the Debtor. And further for the period of 2012-2014 he has received the amount of Rs.3, 60, 000/- after deduction of Rs. 40, 000 as TDS as full and final payment for his Services - the Debt claimed in this Petition/Application does not in existence and in our conscientious view this Petition/Application does not survive in the eyes of Law and deserves Rejection. The Operational Creditor has failed to prove that the amount of Debt as claimed ts in existence as defined U/s. 3 (11) of the Code and therefore as the claimed amount is not in existence this Petition/Application is to be Rejected - petition dismissed.

Summary

Issues:
- Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for commencement of CIRP.
- Dispute over operational debt claimed by the Operational Creditor against the Debtor.
- Allegations of non-payment and default by the Debtor.
- Submissions by both the Operational Creditor and the Debtor regarding the debt and services rendered.
- Examination of evidence and documents presented by both parties.
- Legal interpretation of the existence of debt as per the provisions of the Code.

Analysis:
The judgment by the National Company Law Tribunal, Mumbai Bench, involved an application filed by an Operational Creditor seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Debtor under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Operational Creditor claimed an operational debt of Rs. 26,21,850, comprising a principal amount and interest. The Operational Creditor alleged non-payment by the Debtor for legal services provided, leading to the issuance of demand notices as per the Code's provisions.

The Operational Creditor submitted that services were rendered to the Debtor from 2011 onwards, and invoices were raised accordingly. Despite multiple notices and demands, the Debtor allegedly failed to settle the outstanding amount. The Debtor, on the other hand, contended that the debt claimed was settled through a cheque payment in 2014, supported by a receipt acknowledging the same. The Debtor argued that no amount was due, and the application was based on false grounds.

Upon examining the submissions and evidence presented by both parties, the Tribunal found discrepancies in the Operational Creditor's claims. The Tribunal noted the absence of acknowledgment by the Debtor regarding the invoices raised and highlighted the lack of conclusive proof of non-payment. Additionally, the Tribunal observed that the Operational Creditor failed to provide substantial evidence to support the existence of the debt claimed, as defined under the Code.

Ultimately, the Tribunal concluded that the debt claimed by the Operational Creditor was not proven to be in existence, as required by the Code. Therefore, the application seeking initiation of CIRP was dismissed as misconceived. The Tribunal emphasized that the Operational Creditor did not establish the existence of the debt as defined under the Code, leading to the rejection of the application. No costs were imposed, considering the circumstances.