2019 (12) TMI 1412 - 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 - The Corporate Debtor is referring to the Purchase order of the year 2016. The Operational Creditor is contending that all the works were completed in respect of purchase orders which are two in number of the year 2016. On the other hand the Corporate Debtor is trying to contend that there is a pre-existing dispute by referring to purchase orders of the year 2016 which is not at all the subject matter of the present petition. Except alleging some dispute with regard to the purchase orders of 2016 the Corporate Debtor did not raise any objection with regard to the purchase orders relied upon by the Operational Creditor in the present case. Therefore it cannot be said that there is a prior dispute. Admittedly the Corporate Debtor has not raised any dispute with regard to placing purchase order with Operational Creditor and further there is no dispute with regard to raising invoices by the Operational Creditor. Thus Operational Creditor is able to establish default of operational debt. The Operational Creditor suggested the name of Interim Resolution Professional who has given his consent in Form-2. The Application is in order and deserves to be admitted. Application admitted - moratorium declared.

Summary

Issues Involved:
1. Default in payment by Corporate Debtor.
2. Pre-existing dispute raised by Corporate Debtor.
3. Compliance with terms of purchase orders.
4. Appointment of Interim Resolution Professional and declaration of moratorium.

Issue-Wise Detailed Analysis:

1. Default in Payment by Corporate Debtor:
The Operational Creditor filed a petition under Section 9 of the Insolvency & Bankruptcy Code, 2016, stating that the Corporate Debtor defaulted in payments amounting to ?60,74,330/-, which includes interest at 18% till 28.10.2018. The Operational Creditor supplied spare parts and rendered services to the Corporate Debtor, raising 54 invoices totaling ?96,18,418/-. The Corporate Debtor made part payment of ?46,10,126/-, leaving an outstanding balance of ?50,08,292/-. Despite several reminders, the Corporate Debtor failed to make the remaining payment, leading to the issuance of a Demand Notice on 30.10.2018.

2. Pre-existing Dispute Raised by Corporate Debtor:
The Corporate Debtor contested the petition, alleging that the Operational Creditor did not adhere to the terms of the purchase orders, resulting in a substantial loss. The Corporate Debtor claimed to have paid ?12,94,33,420/- (92% of the project cost) and attributed a loss of ?40 crores due to delays and defective machinery supplied by the Operational Creditor. The Corporate Debtor argued that there was a pre-existing dispute before the issuance of the demand notice, referencing purchase orders from 2016 and alleging that the Operational Creditor owed them ?38 crores.

3. Compliance with Terms of Purchase Orders:
The Operational Creditor rebutted the Corporate Debtor's claims, emphasizing that the Corporate Debtor did not specifically deny the supply and services related to the purchase orders filed in the petition. The Operational Creditor argued that the Corporate Debtor was attempting to create a "moonshine dispute" by mixing facts from other purchase orders. The Tribunal noted that the Corporate Debtor's objections pertained to purchase orders from 2016, which were not the subject of the present petition. The Tribunal found that the Corporate Debtor did not raise any dispute regarding the purchase orders and invoices relevant to the petition, thus establishing the default of operational debt.

4. Appointment of Interim Resolution Professional and Declaration of Moratorium:
The Tribunal admitted the petition under Section 9 of the Insolvency & Bankruptcy Code, 2016, and declared a moratorium as per Section 14 of the Code. The Tribunal prohibited the institution or continuation of suits or proceedings against the Corporate Debtor, transfer or disposal of assets, and recovery actions. The supply of essential goods or services to the Corporate Debtor was to continue without interruption during the moratorium period. The Tribunal appointed Shri Kranthi Kumar Kedari as the Interim Resolution Professional to carry out the functions under the Insolvency & Bankruptcy Code. The Tribunal also directed the public announcement of the initiation of the Corporate Insolvency Resolution Process and communicated the order to the Registrar of Companies and the Interim Resolution Professional.

Order:
The Tribunal admitted the petition, declared a moratorium, and appointed an Interim Resolution Professional. The moratorium would remain effective until the completion of the Corporate Insolvency Resolution Process, approval of the Resolution Plan, or an order for liquidation, whichever is earlier. The public announcement of the initiation of the Corporate Insolvency Resolution Process was to be made immediately.