2019 (9) TMI 1349 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - No objections are being raised to the completeness of the application filed under section 9(2) of the Code. The operational debt remains unpaid, the demand notice was delivered to the corporate debtor and the reply has been examined and found to be not acceptable. The proposed resolution professional Shri Sudhir Kumar Jain, has filed Form 2 in which he has stated that there are no disciplinary proceedings pending against him with the Board of Insolvency Professionals Agency of Cost Accountants of India. In view of the satisfaction of the conditions provided for in section 9(5)(i) of the Code, the petition for initiation of the CIRP process in the case of the corporate debtor M/s. Spray Engineering Devices Ltd. is admitted, and moratorium and appointment of interim resolution professional is directed. Application admitted - moratorium declared.

Summary

Issues Involved:
1. Jurisdiction of the Tribunal.
2. Existence and amount of debt.
3. Demand notice and its compliance.
4. Proposed interim resolution professional.
5. Civil suit and arbitration proceedings.
6. Corporate debtor's objections and defenses.
7. Admissibility of interest on delayed payments.
8. Corporate debtor's shareholding and its relevance.
9. Pending winding-up petition.
10. Conditions for admitting the application under Section 9 of the IBC.
11. Declaration of moratorium and appointment of interim resolution professional.

Detailed Analysis:

1. Jurisdiction of the Tribunal:
The registered office of the corporate debtor is located in Chandigarh, thus falling under the jurisdiction of the Chandigarh Bench of the National Company Law Tribunal (NCLT).

2. Existence and Amount of Debt:
The operational creditor issued invoices from February 29, 2008, to October 1, 2009, amounting to ?53,40,453, which includes a principal amount of ?23,86,605 and interest of ?29,53,830 at 10% per annum on delayed payments. The corporate debtor acknowledged trade receivables amounting to ?23,56,015, thus almost accepting the principal debt.

3. Demand Notice and Its Compliance:
A demand notice in Form 3 and Form 4 was issued on September 28, 2018, and served on the corporate debtor by speed post. The operational creditor filed an affidavit verifying no reply indicating the existence of a dispute, except for a reply dated October 8, 2018.

4. Proposed Interim Resolution Professional:
The operational creditor proposed Mr. Sudhir Kumar Jain as the interim resolution professional, and his consent was furnished in Form 2. There were no disciplinary proceedings pending against him.

5. Civil Suit and Arbitration Proceedings:
The operational creditor had filed Civil Suit No. 104 of 2013 for recovery, and the Punjab and Haryana High Court directed the matter to arbitration. However, the operational creditor chose to file the present petition under Section 9 of the IBC, which does not disentitle it from initiating CIRP.

6. Corporate Debtor's Objections and Defenses:
The corporate debtor argued that the operational creditor breached a cooperation agreement and filed the petition in contempt of the High Court's order. Additionally, the corporate debtor claimed that the petition was filed to harass it, a going concern with over 400 employees, while the operational creditor had not undertaken any business for over five years.

7. Admissibility of Interest on Delayed Payments:
The operational creditor cited the NCLT Mumbai Bench decision in DF Deutsche Forfait AG v. Uttam Galva Steel Ltd., which held that interest on delayed payments could be claimed as operational debt. The Tribunal found the corporate debtor's objection regarding interest irrelevant.

8. Corporate Debtor's Shareholding and Its Relevance:
The corporate debtor's argument that its 50% shareholding in the operational creditor should prevent CIRP initiation was rejected. The Tribunal clarified that the relationship between the parties is irrelevant under Section 9 of the IBC.

9. Pending Winding-Up Petition:
The corporate debtor's pending petition for winding up the operational creditor under Section 272 of the Companies Act, 2013, was deemed independent and not affecting the present proceedings under Section 9 of the IBC.

10. Conditions for Admitting the Application under Section 9 of the IBC:
The Tribunal found the application complete, the operational debt unpaid, the demand notice delivered, and no acceptable dispute raised by the corporate debtor. The proposed interim resolution professional had no disciplinary proceedings against him.

11. Declaration of Moratorium and Appointment of Interim Resolution Professional:
The Tribunal admitted the petition, declared a moratorium, and appointed Mr. Sudhir Kumar Jain as the interim resolution professional. The moratorium included the suspension of suits, transfer of assets, foreclosure actions, and recovery of property by owners or lessors. The interim resolution professional was directed to act in accordance with the Code, make a public announcement, and constitute a committee of creditors.

Conclusion:
The Tribunal admitted the petition for initiating CIRP against the corporate debtor, declared a moratorium, and appointed an interim resolution professional, satisfying all conditions under Section 9(5)(i) of the IBC.