The National Company Law Appellate Tribunal (NCLAT) has upheld the NCLT's order to set aside the plea for initiating Corporate Insolvency Resolution Process (CIRP) against Tata Chemicals.
Operational creditor Allied Silica Ltd had moved the Mumbai bench of the National Company Law Tribunal (NCLT), claiming a debt of Rs 68.44 crore.
Tata Chemicals entered into a Business Transfer Agreement with Allied Silica Ltd in April 2018 to acquire the latter's business of precipitated silica for a consideration of Rs 123 crore, on a slump sale.
According to Allied Silica, Tata Chemicals, the corporate debtor, had only transferred a sum of Rs 65 crore, out of Rs 123 crore and the balance amount of Rs 58 crore has not been paid. On account of default, the interest amounts to Rs 10.44 crore, and thus a total of Rs 68.44 crore is the unpaid operational debt, it said.
The NCLT had rejected the application, mainly on the ground of pre-existing debt.
Tata Chemicals, in its reply, said that the appeal is based on the "suppression of facts and information, misrepresentation and gross misconstruction of the provision of the business transfer agreement (BTA) dated 07 April 2018".
It further submitted that the NCLT rejected the applications under Section 9 of the Insolvency and Bankruptcy Code (IBC) application on the grounds of pre-existence of a dispute and absence of operational debt.
Tata Chemicals also said that the alleged debt is not an "operational debt" and the appellant is not an "operational creditor" as defined under the IBC.
It also said that it had replied to the demand notices through letters dated June 14, 2019 and July 1, 2019, raising disputes to the claims of the applicant.
"Admittedly, the Transfer Consideration of Rs 123,00,00,000 for BTA was divided into closing balance consideration of Rs 65,00,00,000, and remaining balance transfer consideration of Rs 58,00,00,000 into three tranche payments, as more particularly specified in the BTA," Tata Chemicals said.
It submitted that it had duly paid the closing balance consideration and Tranche-I and Tranche II payments to the applicant, even upon non-completion of Tranche-I and Tranche-II conditions, and the corporate debtor had adjusted the Tranche-III payment against the improvement costs borne by it, on account of non-completion of Tranche-II conditions by the applicant.
Contending that the adjustment of Tranche-III payment was agreed mutually between the parties and further recorded in its letter dated January 8, 2019, Tata Chemicals argued that all the requisite amounts under the BTA were duly paid to the applicant, and no outstanding debt is due to the applicant as on the date of the present application.
"The applicant is consciously misinterpreting the BTA to extort money from the corporate debtor," according to Tata Chemicals.
The three-judge, bench headed by the Acting Chairman, Justice Bansi Lal Bhat, said that it is satisfied that there is a plausible contention in the defence raised by the corporate debtor which requires further investigation and that the alleged "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence.
"In the circumstances, we are of the considered opinion that the Ld. Adjudicating Authority has rightly dismissed the application filed under Section 9 of IBC. Thus, we do not find any reason to interfere with the impugned Order. There is no substance in appeal which is accordingly dismissed," its order said.