TMI Blog2023 (11) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor, who acknowledged and showed his readiness and willingness to make the entire payment. The judgment of the Hon ble Supreme Court in E.S. Krishnamurthy [ 2021 (12) TMI 683 - SUPREME COURT ] does not help the Appellant-Corporate Debtor in any manner. The next judgment of this Tribunal relied by learned Counsel for the Corporate Debtor is judgment of this Tribunal in Praveen Kumar Mundra vs. CIL Securities Ltd. [ 2019 (8) TMI 783 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ], where the Appeal preferred against the order, rejecting Section 9 Application was heard. The Appellate Tribunal in the above case in paragraph 9 has upheld the order of the Adjudicating Authority on the ground that the Appellant has initiated CIRP with fraudulently and malicious intent, which judgment has no application in the present case. Present is a fit case to admit when inspite of several promises and acknowledgement, the Corporate Debtor failed to pay the outstanding debt. The Corporate Debtor also has not complied with the order of the Adjudicating Authority directing for depositing the amount equivalent to Indian Rupee in the Court, instead it cited certain regulatory procedure in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year 2014 and 2015. (iii) Vide letter dated 29.09.2014, the Corporate Debtor wrote that they will release all the outstanding payments before 31.10.2014 to the Operational Creditor. The Corporate Debtor once again on 02.04.2015 wrote that all pending outstanding payments shall be paid. The Corporate Debtor again vide letter dated 17.09.2015 acknowledged the outstanding debt and assured the Operational Creditor that they will pay approximately an amount of USD 160,000,00/- by the end of October 2015 and also an amount of USD 200,000.00 during the month of November and December 2015. The Corporate Debtor, however, failed to make the payments. (iv) The learned Counsel for the Operational Creditor issued a statutory notice under Section 433, 434 and 439 of the Companies Act, 1956 and vide their letter dated 26.08.2016 demanded payment of USD 621,348.05 along with interest. The Corporate Debtor replied to the statutory notice vide letter dated 17.09.2016 acknowledging the liability and stated that it shall reconcile their books and ascertain the exact claim due. (v) Before winding up petition could be filed, the Insolvency and Bankruptcy Code, 2016 (hereinafter referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties took the view that the Corporate Debtor having expressed his willingness to deposit the amount, have not committed default and failure of the Corporate Debtor in discharging the admitted outstanding debt has become a force majure in this particular case. Hence, the Adjudicating Authority did not admit the Application. However, the Adjudicating Authority again directed the Corporate Debtor to deposit the amount in Indian rupees in the shape of an interest bearing deposit (FDR) within 60 days. The Adjudicating Authority, refused to initiate the CIRP. The findings of the Adjudicating Authority contained in paragraphs 57 and 58 are to the following effect: 57. Having considered all the peculiar facts and circumstances and the law laid down by the Hon ble Supreme Court and Hon ble Appellate Tribunal, it will not be a practical approach to pass an order of CIRP in respect of the Corporate Debtor herein even though, the Corporate Debtor has acknowledged its debts and had made promises and undertakings to deposit the amount in Court. The main hurdle that is coming in the way of the Corporate Debtor in making payment of the outstanding debt is that it has to be paid in USD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate Debtor has come up in this Appeal. 3. We have heard Shri Preet Pal Singh and Shri Saurabh Sharma, learned Counsel appearing for the Operational Creditor and Shri Kumarpal R Chopra and Shri Chiron Singh, learned Counsel appearing for the Corporate Debtor. 4. The learned Counsel for the Operational Creditor submits that the debt of the Operational Creditor having been acknowledged by the Corporate Debtor, which is due and has not been paid by the Corporate Debtor inspite of repeated assurances, the Adjudicating Authority committed error in not admitting Section 9 Application. It is submitted that remittance of the amount to the Operational Creditor by the Corporate Debtor was obligation of the Corporate Debtor and the plea of the Corporate Debtor that he could not obtain permission of the RBI cannot be construed a ground to refuse to admit Section 9 Application. The Corporate Debtor has never been serious in making the payment, which is clear from repeated correspondence made by the Corporate Debtor assuring the payments, including the execution of the consent Term of Settlement, which was not complied with by the Corporate Debtor. The Adjudicating Authority has even dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o time have been noticed by the Adjudicating Authority. From the sequence of the facts and pleadings of the parties, there remains no dispute between the parties regarding the outstanding dues of the Operational Creditor to a sum of USD 621,348.05 plus interest. It is relevant to notice that Corporate Debtor has time and again acknowledged the debt, which has been noted by the Adjudicating Authority in its order. The amount became due at the end of year 2013. However, after adjustment of the part payments and thereafter repeated assurances were given by the Corporate Debtor for making the payment, no payment was made. In this context, we only notice one of the letter dated 17.09.2015 issued by the Corporate Debtor to the Operational Creditor, which letter was part of the Application filed under Section 9 by the Operational Creditor. The letter dated 17.09.2023 is as follows: Dated 17th September, 2016 The President Hytera Communications Corporation Limited Shenzhen, China. Sub: Overdue payment Ref: Your letter dated 28.08.2015 Dear Mr. Chen, Hope you are in good health and doing well in your business. With reference to your lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payments whatever is due. We are trying out best to come out from the present crisis and we are not confident that next 6-8 months time we will manage the positioning of the company. You have shown enough patience and supported us, we are requesting you to bear with us for few more months. In between we are in the process of sending you the payments. Thanking you, For Simoco Telecommunications (South Asia) Limited Sd/- (Sanjoy Kumar Ghosh) Managing Director 8. The above letter clearly indicates that the Corporate Debtor was not in the position to make the payment of outstanding, although the dues were acknowledged. In the said letter itself, the Corporate Debtor has stated that it was in bankrupt situation. The Company Petition was filed by the Operational Creditor on 30.05.2018 and thereafter consent Terms of Settlement were entered on 02.02.2019, on which basis the Company Petition was disposed of, which subsequently was revived and proceeded further. On 30.08.2021, on behalf of the Corporate Debtor a statement was made by the Corporate Debtor, stating that they are willing to make the payment, which is due to the Operational Creditor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are yet to be completed by the Corporate Debtor. 10. Inspite of the order dated 12.07.2022, the Corporate Debtor did not deposit the amount and thereafter the Company Appeal was heard and finally decided. The Adjudicating Authority by the impugned order, after noticing the submissions of the parties has recorded its conclusion in paragraph 57 and 58, which we have already extracted above. 11. The Adjudicating Authority observed that although the Corporate Debtor has acknowledged the outstanding debt, but Corporate Debtor has not committed any default and the failure of the Corporate Debtor in discharging the admitting outstanding debt has become a force majure in this particular case. We are not in agreement with the aforesaid view of the Adjudicating Authority. The default has been committed by the Corporate Debtor, which is an admitted fact and repeated acknowledgment by the Corporate Debtor and promises to make the payments were in vain. The default was committed by the Corporate Debtor within the meaning of the Code and the reason that Corporate Debtor or its Bankers were unable to obtain permission for remittance of amount overseas, cannot be made a reason to hold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court affirmed the order of the Adjudicating Authority and has held that Adjudicating Authority committed a grave error of law by admitting application of the Operational Creditor, even though there was a preexisting dispute as noted by the Adjudicating Authority. The Hon ble Supreme Court held that there being pre-existing dispute, Application under Section 9 could not have been admitted. In above reference the Hon ble Supreme Court has examined the nature and jurisdiction exercised by the Adjudicating Authority. In paragraph 31 and 32, following has been laid down: 31. The NCLT, exercising powers under Section 7 or Section 9 of IBC, is not a debt collection forum. The IBC tackles and/or deals with insolvency and bankruptcy. It is not the object of the IBC that CIRP should be initiated to penalize solvent companies for nonpayment of disputed dues claimed by an operational creditor. 32. There are noticeable differences in the IBC between the procedure of initiation of CIRP by a financial creditor and initiation of CIRP by an operational creditor. On a reading of Sections 8 and 9 of the IBC, it is patently clear that an Operational Creditor can only trigger the CIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor is judgment of the Hon ble Supreme Court in E.S. Krishnamurthy and Ors. vs. Bharathi Hi-tech Builders Pvt. Ltd. (supra). In the above case, Hon ble Supreme Court while considering an Application under Section 7 held that Adjudicating Authority cannot direct Corporate Debtor to settle the dispute. It has been held by the Hon ble Supreme Court that Adjudicating Authority is empowered to only verify whether a default has occurred or not. Based upon its decision, the Adjudicating Authority either admit or reject an Application. In paragraph 32 and 34, following has been laid down: 32. In Innoventive Industries [Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407, paras 28 and 30 : (2018) 1 SCC (Civ) 356] , a two-Judge Bench of this Court has explained the ambit of Section 7 IBC, and held that the adjudicating authority only has to determine whether a default has occurred i.e. whether the debt (which may still be disputed) was due and remained unpaid. If the adjudicating authority is of the opinion that a default has occurred, it has to admit the application unless it is incomplete. Speaking through Rohinton F. Nariman, J., the Court has observed : ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or rejection of such application, as the case may be. * * * 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is due i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise. (emphasis supplied) 34. The adjudicating authority has clearly acted outside the terms of its jurisdiction under Section 7(5) IBC. The adjudicating authority is empowered only to verify whether a default has occurred or if a default has not occurred. Based upon its decision, the adjudicating authority must then either admit or reject an application, respectively. These are the only two courses of action which are open to the adjudicating authority in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bt Recovery Procedures. 19. If IBC is purely used for the purpose of Debt Recovery, particularly when the amounts due are small, and the Company is a solvent entity and is a going concern, the question of Reorganising or Resolution of the Company does not arise. This Tribunal in Binani Industries Limited v. Bank of Baroda , Company Appeal (AT) (Ins.) No. 82 of 2018, has differentiated between Recovery and Resolution and has observed that IBC is not a Recovery Proceeding. Recovery dispossesses the Corporate Debtor of its assets while a Resolution is an effort to keep it afloat. Further, this Tribunal in Asset Advisory Services v. VSS Projects , CP (IB) No. 96/7/HDB (2017), and also in Praveen Kumar Mundra v. CIL Securities Ltd. , 2019 SCC OnLine NCLAT 334 Page Company Appeal (AT) (Insolvency) No. 512 of 2021 NCLAT 334, has noted that CIRP cannot be initiated with fraudulent intent for any purpose other than the Resolution of Insolvency or Liquidation and therefore it is clearly covered under Section 65 of the Code. 20. The Hon'ble Supreme court in Vidarbha Industries Power Ltd. v. Axis Bank Ltd. 2022 SCC OnLine SC 841 has observed that even if ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for which appropriate Civil Proceedings may lie. 23. In the above judgment, this Tribunal held that definition of operational debt cannot be interpreted widely so as to include any agreement between the parties, which does not specifically pertain to the supply of goods or services. The above judgment has no application in the facts of the present case, since in the present case the operational debt arose of supply of goods, which is an admitted fact. 24. The next judgment relied by the learned Counsel for the Corporate Debtor is judgment of Chennai Bench in Transfer Appeal (AT) No.227 of 2021 (Company Appeal (AT) (INS.) No.326 of 2020) Tricolite Electrical Industries Limited vs. WIPRO Limited, where the Appeal has been filed against the order dismissing Section 9 Application. The order was affirmed holding that when there is pre-existing dispute, Application under Section 9 could not have been entertained against a solvent company. In paragraph 16-17, following has been held: 16. It is the consistent stand of the Respondent Company that 97% of the Amount was paid and the balance 3 % was kept on hold only on account of evaluating customer satisfaction and it was e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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