2019 (6) TMI 1519 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - contractual relationship between the Operational Creditor and the Corporate Debtor or not - HELD THAT - In the present case, the Operational Creditor has paid money in advance to the Corporate Debtor and on failure by the Corporate Debtor to supply the goods, the operational creditor has invoked the jurisdiction of this Adjudicating Authority under the 1B Code. The contention of the Corporate Debtor is that there is no contract between the parties and the agreement submitted by the Operational Creditor is not signed by the Corporate Debtor. However, the Corporate Debtor has not made any statement about its Invoice dated 08.02.2017. The invoice itself is a contract between the parties. It is also pertinent to note that as per email dated 07.03.2017 and 09.03.2017 of the Corporate Debtor, it could be seen that the Corporate Debtor himself has mentioned about the agreement. It could also been seen that the said email correspondence revolve upon the issue of supply of sugar and repayment of the amount received. Therefore, the contention of the Corporate Debtor that there is no agreement substantiated and it is contrary to its own email correspondence. Since, the amount due is arising out of an agreement of sale of goods, the Operational Creditor is having every right of approaching this Adjudicating Authority under the 1B Code. Since the Corporate Debtor failed to make the payment and the receipt of the same is not denied by the Corporate Debtor and the email correspondences produced by the Operational Creditor revolves upon the issue of supplying sugar and refund of amount. In these circumstances, the Contentions raised by the Corporate Debtor is to fail. Further, the Operational Creditor has proved its case by placing overwhelming evidence that default has occurred for which the Corporate Debtor was liable to pay. The petitioner has complied with the all the requirement as stipulated under the provisions of the 1B code, 2016 for the purpose of initiating Corporate Insolvency Resolution Process. In these circumstances, this Adjudicating Authority is inclined to admit the instant petition. Appeal admitted.

Summary

Issues involved:
1. Company petition filed under section 9 of the Insolvency and Bankruptcy Code, 2016 against a corporate debtor for failure to supply goods after receiving payment.
2. Dispute regarding the existence of a valid contract between the operational creditor and the corporate debtor for the supply of goods.
3. Examination of evidence presented by both parties to determine the validity of the operational creditor's claim and the corporate debtor's defense.
4. Appointment of an Interim Resolution Professional (IRP) and declaration of moratorium as per the provisions of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:
Issue 1: The operational creditor filed a company petition under section 9 of the Insolvency and Bankruptcy Code, 2016 against the corporate debtor for failing to supply goods after receiving payment. The operational creditor had paid an advance amount for the purchase of sugar, but the corporate debtor failed to deliver the agreed-upon quantity. Despite issuing a demand notice, the corporate debtor did not refund the amount due, leading to the operational creditor invoking the provisions of the Code to initiate insolvency proceedings.

Issue 2: The main dispute revolved around the existence of a valid contract between the parties for the supply of goods. The corporate debtor argued that there was no contractual relationship and that the alleged agreement was not signed by them. However, the operational creditor provided evidence of the agreement, including invoices and email correspondences, indicating a contractual relationship. The corporate debtor's contradictory statements and actions further supported the existence of an agreement between the parties.

Issue 3: After hearing both sides and examining the documents presented, the Adjudicating Authority found that the operational creditor had established a genuine default on the part of the corporate debtor. The operational creditor provided substantial evidence, including invoices, notices, and bank statements, to support their claim. The Adjudicating Authority noted that the corporate debtor's failure to make the payment and the acknowledgment of the agreement in their email correspondence weakened their defense. Consequently, the Adjudicating Authority admitted the company petition and ordered the commencement of the Corporate Insolvency Resolution Process.

Issue 4: Following the admission of the petition, the Adjudicating Authority appointed an Interim Resolution Professional (IRP) to manage the affairs of the corporate debtor during the insolvency resolution process. A moratorium was declared to protect the assets of the corporate debtor and prevent any legal actions against them. The IRP was directed to comply with the provisions of the Code and ensure the smooth functioning of the resolution process, with cooperation expected from the directors and promoters of the corporate debtor.

Overall, the judgment highlighted the importance of honoring contractual obligations, providing substantial evidence to support claims in insolvency proceedings, and following the prescribed procedures under the Insolvency and Bankruptcy Code, 2016 to facilitate a successful resolution process.