2019 (8) TMI 1733 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditor - existence of debt and dispute or not - Whether the Petition is barred under Section 11 of I B Code? - HELD THAT - A plain reading of the provision of section 11 makes it clear that the Code prohibits certain persons from making an Application under this code. It is the argument of the Corporate Debtor that since the Petitioner Company is undergoing CIRP the same is barred under Section 11 from making any application before this tribunal through its Resolution Professional - The intent of the legislature was to stop re-filing of Insolvency proceedings against the same corporate Debtor again and again. This is clearly now the case here. Therefore, this argument of the Corporate Debtor is rejected forthwith. Since the resolution process has already elapsed and neither the CoC or the Resolution professional exist any longer, is this petition anymore maintainable? - HELD THAT - As per section 35 (1) (d) r/w section 35 (1) (k) of the Code the Liquidator herein is completely authorised to represent the Petitioner company before this Tribunal. So, the argument of the Corporate Debtor doesn t have any merit and is rejected. Whether there is any existence of dispute between the parties? - HELD THAT - The Corporate Debtor had never even once raised a single shred of objection or dispute against the Petitioner in the past seven years about either quality of good or anything else. It was for the first time that the Corporate Debtor only after receiving a notice from the Petitioner started raising disputes - from prima facie it is clear that the dispute raised by the Corporate Debtor is patently feeble and is an assertion which is not supported by any evidence. This defence of the Corporate Debtor also has no merit and is therefore rejected. Thus, the Corporate Debtor defaulted in making the payment towards the liability to the Petitioner and the petition deserves to be admitted - application admitted - moratorium declared.

Summary

Issues Involved:
1. Whether the Petition is barred under Section 11 of the Code.
2. Whether the petition is maintainable given that the resolution process has already elapsed and neither the CoC nor the Resolution Professional exist any longer.
3. Whether there is any 'existence of dispute' between the parties.

Detailed Analysis:

i. Whether the Petition is barred under Section 11 of the Code:

The Corporate Debtor argued that the Petitioner Company, undergoing Corporate Insolvency Resolution Process (CIRP), is barred under Section 11 from making any application before the tribunal through its Resolution Professional. Section 11 of the Insolvency and Bankruptcy Code specifies that certain persons, including a corporate debtor undergoing a CIRP, are not entitled to initiate the corporate insolvency resolution process.

However, the tribunal rejected this argument, referencing the Supreme Court's judgment in 'Forech India Ltd. Vs. Edelweiss Assets Reconstructions Co. Ltd.' which clarified that Section 11 has limited application and only bars a corporate debtor from initiating a petition under Section 10 if a liquidation order has been made against it. The tribunal further relied on the 'Notes on Clauses' of the Insolvency and Bankruptcy Bill, 2016, to emphasize that the legislative intent was to prevent repeated filings of insolvency proceedings against the same corporate debtor, which was not the case here. Therefore, this argument of the Corporate Debtor was rejected.

ii. Whether the petition is maintainable given that the resolution process has already elapsed and neither the CoC nor the Resolution Professional exist any longer:

The Corporate Debtor contended that since the resolution period had lapsed, neither the Committee of Creditors (CoC) nor the Resolution Professional existed, making the petition non-maintainable. The Petitioner countered by stating that the National Company Law Tribunal, Ahmedabad, had passed a liquidation order on 19.11.2018, appointing the Resolution Professional as the Liquidator under Sections 33 and 34 of the Code.

The tribunal agreed with the Petitioner, citing Section 35 (1) (d) read with Section 35 (1) (k) of the Code, which authorizes the Liquidator to represent the Petitioner company before the tribunal. Thus, the second argument of the Corporate Debtor was found to lack merit and was rejected.

iii. Whether there is any 'existence of dispute' between the parties:

The Corporate Debtor argued the existence of a pre-existing dispute, referencing various letters disputing the Petitioner’s claims and relying on the Supreme Court's judgment in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited. The Supreme Court had stated that the adjudicating authority must determine whether there is a plausible contention requiring further investigation and that the dispute is not a patently feeble argument or unsupported assertion.

Upon review, the tribunal found that the Corporate Debtor had not raised any objections or disputes against the Petitioner in the past seven years regarding the quality of goods or other issues. The disputes were only raised after receiving a notice from the Petitioner. The tribunal concluded that the 'dispute' raised by the Corporate Debtor was patently feeble and unsupported by evidence. Therefore, this defense of the Corporate Debtor was also rejected.

Order:

The tribunal, satisfied with the Petition filed by the Operational Creditor in compliance with Section 9 of the Insolvency and Bankruptcy Code, admitted the Petition and declared a moratorium with specific directions:
- Prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor.
- Ensuring the supply of essential goods or services to the Corporate Debtor is not terminated or interrupted during the moratorium period.
- Appointing Mahesh Kumar Gupta as the Interim Resolution Professional to carry out the functions under the Insolvency and Bankruptcy Code.

The Petition was admitted, and the Registry was directed to communicate the order to both parties and the Interim Resolution Professional immediately.