2019 (5) TMI 1683 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in payment - Section 9 of the Insolvency and Bankruptcy Code 2016 - HELD THAT - The existence of debt and default is reasonably established by the Financial Creditor. The Application under sub-section (2) of Section 9 of I B Code 2016 is complete. The existing financial debt of more than rupees one lakh against the corporate debtor and its default is also proved. Accordingly the petition filed under section 9 of the Insolvency and Bankruptcy Code for initiation of corporate insolvency resolution process against the corporate debtor deserves to be admitted. Application admitted - moratorium declared.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Existence of Debt and Default
3. Dispute Regarding Quality of Goods
4. Pre-existing Dispute
5. Technical Objections Raised by Corporate Debtor
6. Appointment of Interim Resolution Professional (IRP)

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petition was filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor for initiating CIRP. The claim was based on the Corporate Debtor's default in payment of ?15,96,723/- against the invoices raised by the Operational Creditor.

2. Existence of Debt and Default:
The Operational Creditor provided evidence of the debt amounting to ?15,96,723, which included the principal amount and interest. The Corporate Debtor had acknowledged the debt in its ledger account and through email correspondence. The tribunal found that the existence of debt and default was reasonably established by the Operational Creditor.

3. Dispute Regarding Quality of Goods:
The Corporate Debtor raised several complaints about the quality of goods supplied, leading to the issuance of credit notes by the Operational Creditor. The Operational Creditor argued that the issue of defective goods was settled after issuing the credit notes, and the Corporate Debtor's subsequent claim for losses was an afterthought.

4. Pre-existing Dispute:
The Corporate Debtor claimed a loss of ?28,00,000/- due to defective goods, which was first communicated in response to the demand notice. The tribunal referred to the Supreme Court's judgment in Mobilox Innovations Pvt Ltd vs Kirusa Software Pvt Ltd., emphasizing that a dispute must pre-exist the receipt of the demand notice. The tribunal found that the dispute regarding the loss was raised only after the receipt of the demand notice, and thus, it could not be considered a pre-existing dispute.

5. Technical Objections Raised by Corporate Debtor:
The Corporate Debtor raised several technical objections, including contradictions in the petition and the demand notice and the need for separate actions for each purchase order. The tribunal dismissed these objections, noting that the purchase orders were part of a continuing business transaction and that the Corporate Debtor had not contested their validity.

6. Appointment of Interim Resolution Professional (IRP):
The tribunal appointed Mr. Naren Sheth as the Interim Resolution Professional (IRP) to carry out the functions under the I&B Code. The tribunal also declared a moratorium under Section 14 of the I&B Code, prohibiting various actions against the Corporate Debtor and ensuring the supply of essential goods or services during the moratorium period.

Conclusion:
The tribunal admitted the petition filed under Section 9 of the I&B Code for initiating CIRP against the Corporate Debtor. The tribunal found that the existence of debt and default was established, and the dispute raised by the Corporate Debtor was not pre-existing. The tribunal dismissed the technical objections raised by the Corporate Debtor and appointed an IRP to carry out the necessary functions under the I&B Code.