An operational debt must exceed statutory thresholds and be undisputed to maintain application under insolvency laws; pre-existing disputes can invalidate claims.

ORDER

[PER: SANJIV DUTT, MEMBER (TECHNICAL)]

1. BACKGROUND

1.1 This Application bearing C.P.(IB) No.746/MB/2023 was filed by Railroad Logistics (India) Private Limited, the Operational Creditor on 17.02.2023 under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code”) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as “the AAA Rules”) through Ms. Sahana Nikhil Shetty, its Director and Authorised Representative for initiating Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) in respect of Mahindra Logistics Limited, the Corporate Debtor.

1.2 The Operational Creditor is engaged in the business of transport, storage and communications and has been executing contractual work with various organisations. It is a registered MSME. The Corporate Debtor entered into multiple agreements with the Operational Creditor during the period from 01.04.2017 to 30.06.2021 for the transportation of vehicles or parts thereof across India. Pursuant to these agreements, the Operational Creditor rendered services and raised several invoices out of which Rs.1,63,35,529/- remains unpaid as on 31.12.2022. As per Section 15 of the MSMED Act, 2006 , the Corporate Debtor is liable to pay this principal amount along with interest of Rs.1,70,75,042/-, bringing the total amount claimed to be in default to Rs.3,34,10,571/-.

1.3 A Demand Notice dated 16.01.2023 was issued under Section 8 of the Code but the Corporate Debtor failed to make payment within 10 days. Consequently, the Operational Creditor has filed this Application seeking initiation of CIRP against the Corporate Debtor.

2. AVERMENTS OF OPERATIONAL CREDITOR

2.1 The Operational Creditor, in accordance with the terms of the agreements, provided services to the Corporate Debtor, which were duly received without objection.

2.2 For these services, multiple invoices were raised, leaving a principal outstanding amount of Rs.1,63,35,529/-. The Corporate Debtor acknowledged the debt and assured payment, with continuous follow-ups by the Operational Creditor. As an MSME, the Operational Creditor is entitled to compound interest at three times the RBI-notified bank rate, amounting to Rs.1,70,75,042/- as on 31.12.2022, with further accruals until full payment.

2.3 Being aggrieved by the action of the Corporate Debtor in not making the payment of the outstanding dues, the Operational Creditor sent a Demand Notice on 16.01.2023 in Form 3 under Section 8 of the Code. The Corporate Debtor sent its Reply dated 25.01.2023 to the Operational Creditor objecting to the claim made in the Demand Notice without necessary proof and supporting documents and also raising dispute with regard to the amount claimed to be in default. Thus, it is submitted that the Reply dated 25.01.2023 is an afterthought and fabrication of facts and figures in order to avoid releasing payment of debt.

2.4 Prior to sending the Demand Notice, the Corporate Debtor neither disputed nor denied the claims raised by the Operational Creditor. Rather, it acknowledged the debt. However, despite acknowledging the debt, the Corporate Debtor deliberately, in order to harass the Operational Creditor, neglected to make payment of the outstanding dues owed to the Operational Creditor, due to which the Operational Creditor was facing financial difficulties.

3. CONTENTIONS OF CORPORATE DEBTOR

3.1 The Corporate Debtor in its Affidavit-in-Reply dated 11.10.2023 has denied all allegations and contentions of the Operational Creditor and opposed the present Application on various grounds.

3.2 Before sending Demand Notice dated 16.01.2023 under Section 8 of the Code, the Operational Creditor had issued a legal notice dated 17.11.2021, alleging an outstanding amount of Rs.2,60,42,595/- including interest. This was refuted by the Corporate Debtor thr