TMI Blog2017 (3) TMI 1616X X X X Extracts X X X X X X X X Extracts X X X X ..... pany petition dismissed. - C.P. 40/I & BP/NCLT/MAH/2017 - - - Dated:- 29-3-2017 - B.S.V. Prakash Kumar and V. Nallasenapathy, JJ. For Appellant: Joyodip Bhattacharya, Surendra Kumar and Anoop Patil, Advocates ORDER B.S.V. Prakash Kumar, Member (J) 1. The Operational Creditor (creditor) filed this CP u/s. 9 of I B Code 2016 stating that this creditor supplied goods and services to the Corporate Debtor company (debtor), in consideration, raised invoices for goods and services supplied to the debtor for its GF Toll Project, DS Toll and NK Toll Project raising invoices and debit notes to an amount of ₹ 8,33,80,343 towards GF Toll Project and for ₹ 27,31,430 towards DS Toll Projects. Out of which, the debtor has made total payment of ₹ 5,41,07,993 till date on a running account basis with respect to GF Toll Project by deducting ₹ 6,23,146 and ₹ 1,96,876 towards TDS leaving outstanding of ₹ 2,84,52,328 pertaining GF Toll Project, as to other two projects, no payment has been made. The Creditor says that the Debtor made last payment on 17.05.2013 ever since the debtor has not made any payment till date towards invoice amounts outst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... replies on 14.2.2017, 15.2.2017 and on 16.2.2017 stating that for the creditor failed to perform the contract as agreed between the creditor and the debtor, the debtor is under no obligation to repay the same saying that the debtor indeed has suffered loss by non-performance of the Contract as agreed between them. 4. Today, the debtor Counsel, without prejudice to the contentions raised by the debtor, submits that even if the claim raised by the creditor is assumed as true and correct, the Creditor, basing on this claim, cannot initiate the insolvency proceedings labelling this Company as unable to pay this money to the creditor. The debtor Counsel submits that there is an Arbitration Clause in the work order between them, therefore there being Arbitration clause, the creditor ought to have initiated Arbitration proceedings against this claim instead of initiating this Insolvency Resolution process against this Company that has net worth of ₹ 24,000 crore approximately with a Paid up Capital of ₹ 263 crore. The debtor Counsel also submits that it has liability of ₹ 29,000 crore and assets of ₹ 51,000 crore. The debtor Counsel further submits that since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate the assets of the company and distribute the same among the creditors. By reading this Code, it makes it clear it is not meant for recovery. 7. To defeat this argument, the creditor counsel has placed a citation Ashoka Industries v. Tobu Enterprises Ltd. (2003 (65) DRJ 281) to say that when debt is admitted, Court should not countenance a defence articulated for dismissal of winding-up petition. When the Debtor Company admitted its debt and requested for further supplies, the defence taken is to be considered as sham and dishonest. The Creditor Counsel submits that the debtor in the case supra despite having put up similar defence stating that supply of goods is not in accordance with the arrangement the court has not considered it. Therefore, this Bench, considering the ground of refusal as mala fide, may admit this Application u/s. 9 of I B Code. 8. The Hon'ble Delhi High Court mentioned in para 5 of it as follows: i) If there is a bona fide dispute and the defense is a substantial one, the Court will not wind-up the company. (ii) Where the debt is undisputed, the Court will not act upon a defense that the company has the ability to pay the debt but the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the insolvency proceedings could be initiated only on two grounds mentioned above. 10. It is not out of context to mention what is meant by insolvency and how many kinds of insolvencies are there. 11. Insolvency means inability to make payment of owed money on time by a person or a company. In companies, there are two forms of insolvencies -- one is cash flow insolvency and another is Balance Sheet insolvency. 12. Cash Flow insolvency is when a person or a company has enough assets to pay what is owed, but does not have the appropriate form of payment. For example, a person may own a large house and valuable car, but not have enough liquid assets to pay a debt when it falls due. The better off in this situation is it can usually be resolved by negotiation. 13. Balance Sheet insolvency is when a person or company does not have enough assets to pay all of its debts, and then such company might enter into bankruptcy directly. It need not be said separately that refusal to pay amounts to deemed insolvency; the logic behind it is inability to repay as well as refusal to repay leads to non-payment to the creditors. 14. In the present case, the debtor is neither a C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 9, and 10 of the I B Code and no other case. The common right under I B Code is that there must be either insolvency or bankruptcy. If it is a company, there shall be insolvency situation, if it is individual person there shall be bankruptcy situation. So the sections of law governed by I B Code could not be taken out of context to apply to initiate insolvency process unless the company is unable to pay or refused to pay, because initiating this process is held out to the public at large with moratorium on its head and management is given to Insolvency Resolution Professional suspending the powers of Board of Directors. Moreover, no debt of this company has become NPA. 17. It goes without saying refusal of remedy under this Code, will not make the creditor remediless, it is always open to it to proceed before Civil Court for realization of its debt, on the top of it, this Operational Creditor has another advantage to initiate Arbitration proceeding that has not been availed. 18. The objective and the reliefs envisaged in this Code are for different purposes, not for recovery of claims. Of course, ultimate object is to ensure that creditors' interest is not evapora ..... X X X X Extracts X X X X X X X X Extracts X X X X
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