2018 (1) TMI 1664 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of genuine dispute as alleged by the corporate debtor or not - HELD THAT - The ingredients as provided under section 9(5) (a to c) are satisfied by the petitioner for admission of this petition under section 9 of I B Code. The Form 2 contains written communication from the proposed insolvency professional. The Insolvency Professional has given a declaration that no disciplinary proceeding is pending against him. Therefore, requirement under section 9(5)(e) of I B Code also complied in the case in hand. Whether the petitioner is an insolvent and a willful defaulter to is a bank is not a factor to be considered by this Adjudicating Authority. It is an indication that the goods which were delivered to the corporate debtor and the demand made by the petitioner is genuine and those entire goods purchased by the corporate debtor was utilized by it. Raising of quality issue and the alleged return of goods and sending debit notice are all factors seems to have raised in the reply for the sake of objection. No materials are available to prove that any further investigation regarding the demand made is necessitated or that the dispute raised is genuine - In the case in hand learned C.F.O failed to convince that a dispute regarding plea of discharge is true or that the dispute raised in the reply is genuine which require further consideration. In the present case, the Respondent-Corporate debtor not at all succeeded in proving the existence of a dispute regarding the supply of goods received by him whereas corporate debtor committed default by not making payment of outstanding dues along with interest to the operational creditor - it can be concluded that the objection raised by the corporate debtor is mere objection raising a dispute for the sake of dispute and unrelated to clause (a) or (b) or (c) of sub-section 6 of section 5 of the 'I B Code'. It appears that raising a dispute in the reply is for the sake of dispute and is vague and motivated to evade the liability. This petition deserves admission under section 9 of I B, Code - petition admitted - moratorium declared.

Summary

Issues Involved
1. Initiation of corporate insolvency process under Section 9 of the Insolvency & Bankruptcy Code, 2016.
2. Existence and validity of the claimed debt and default by the corporate debtor.
3. Allegations of forged tax invoices and fraudulent practices by the operational creditor.
4. Applicability of the Limitation Act, 1962.
5. Compliance with procedural requirements under the Insolvency & Bankruptcy Code, 2016.

Detailed Analysis

1. Initiation of Corporate Insolvency Process:
The petitioner filed an application under Section 9 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of the corporate insolvency process against the corporate debtor. The application was supported by necessary documents including invoices, VAT confirmation certificates, and a statement of accounts, demonstrating the existence of an operational debt and default by the corporate debtor.

2. Existence and Validity of the Claimed Debt and Default:
The petitioner, an operational creditor, supplied goods worth ?2,40,08,624 to the corporate debtor, who made partial payments amounting to ?20,04,79,817, leaving an outstanding principal sum of ?4,75,28,807. Despite receiving a demand notice, the corporate debtor failed to clear the dues. The tribunal found that the corporate debtor did not provide substantial evidence to prove the discharge of the outstanding dues or the existence of a genuine dispute. The tribunal noted that the corporate debtor's reply to the demand notice was vague and unsupported by evidence, thus failing to establish a credible dispute.

3. Allegations of Forged Tax Invoices and Fraudulent Practices:
The corporate debtor alleged that the petitioner submitted forged tax invoices and engaged in fraudulent practices. However, the tribunal observed that these allegations were not substantiated with concrete proof. The tribunal emphasized that mere allegations without supporting evidence do not constitute a genuine dispute under the Insolvency & Bankruptcy Code, 2016.

4. Applicability of the Limitation Act, 1962:
The corporate debtor argued that the petitioner's claim was time-barred under the Limitation Act, 1962. The tribunal rejected this argument, citing a precedent from the Hon'ble National Company Law Appellate Tribunal (NCLAT) in Neelkanth Township and Construction Pvt. Ltd. vs. Urban Infrastructure Trustees Ltd, which held that a debt with continuous default is not barred by limitation. The tribunal noted that the last part payment was made in July 2017, which kept the debt within the limitation period.

5. Compliance with Procedural Requirements:
The tribunal confirmed that the petitioner complied with all procedural requirements under Section 9 of the Insolvency & Bankruptcy Code, 2016, including the submission of Form 2 containing the written communication from the proposed insolvency professional, who declared that no disciplinary proceedings were pending against him. The tribunal also noted that the demand notice was duly served, and the corporate debtor failed to respond with any substantial dispute within the prescribed period.

Conclusion
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 appointed Shri Arun Kumar Gupta as the Interim Resolution Professional (IRP) and directed the IRP to make a public announcement of the corporate insolvency resolution process. The tribunal concluded that the corporate debtor's objections were mere attempts to evade liability without any genuine dispute, thus warranting the initiation of the insolvency process.