2018 (8) TMI 2078 - 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 - HELD THAT - The petition under Section 9 of the Code can be filed after serving of the demand notice issued under Section 8 of the said Code. The application has to be filed in Form 5, as prescribed in Rule 6(1) of the Code in order to comply with the requirement of Section 9(2) of the Code. As all the requirements of Section 9 of the Code have been fulfilled, we find that the application for initiation of Corporate Insolvency Resolution Process against the respondent-corporate debtor deserves to be admitted - keeping in view the fact that the ledger documents do not contain any entry of addition of interest having accrued over the amount in default the same cannot be accepted. However, being the default in respect of the commercial transaction, we allow the interest @ 9% per annum over the amount in default from the date of last payment made on 04.04.2018. In case the petitioner has to still claim higher rate of interest, it may avail remedy before the Civil Court. The petition is admitted and moratorium is passed under sub-section (1) of Section 14 of the Code.

Issues Involved:
1. Initiation of Insolvency Resolution Process
2. Existence of Operational Debt and Default
3. Compliance with Procedural Requirements
4. Existence of Dispute
5. Appointment of Interim Resolution Professional
6. Claim of Interest
7. Moratorium Order

Detailed Analysis:

1. Initiation of Insolvency Resolution Process:
The petition was filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of the Insolvency Resolution Process against the Corporate Debtor. The application was filed in Form-5 as prescribed under Rule 6(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

2. Existence of Operational Debt and Default:
The Operational Creditor, a proprietorship concern, supplied paddy to the Corporate Debtor regularly from 2012, with the last consignment delivered on 09.11.2015. Payments became irregular from April 2017, and a cheque issued by the Corporate Debtor on 30.12.2017 bounced. The last payment was made on 04.04.2018. The total claimed default amount was ?5,49,73,699, which included interest of ?2,06,52,630 at 19.8% per annum.

3. Compliance with Procedural Requirements:
The petitioner complied with Section 9(2) and 9(3)(b) of the Code by serving a demand notice dated 16.04.2018 in Form-3 and filing the application in Form-5. The petitioner also filed certificates from banks confirming the last payments received and maintained the ledger account of the Corporate Debtor, showing the outstanding debt tallying with the claimed amount.

4. Existence of Dispute:
The Corporate Debtor did not contest the petition during the hearing and did not file any reply or objections. The reply to the demand notice dated 11.05.2018 claimed that the amount was disputed and alleged the petitioner had supplied substandard paddy. However, there was no evidence of any pre-existing dispute before the demand notice. The Tribunal referred to the Supreme Court's decision in Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd., emphasizing that a dispute must be genuine and not spurious or illusory.

5. Appointment of Interim Resolution Professional:
The petitioner proposed the name of Mr. Mast Ram as the Interim Resolution Professional, who provided his consent and necessary information. There were no disciplinary proceedings pending against him.

6. Claim of Interest:
The Tribunal found that the ledger account did not reflect any interest entries, although the petitioner relied on a clause for delayed payment interest at 1.65% per month. The Tribunal allowed interest at 9% per annum from the date of the last payment (04.04.2018) and suggested that the petitioner could claim a higher rate of interest through a civil court.

7. Moratorium Order:
The Tribunal admitted the petition and passed a moratorium under Section 14(1) of the Code, prohibiting:
(a) Institution or continuation of suits or proceedings against the Corporate Debtor.
(b) Transferring or disposing of the Corporate Debtor's assets.
(c) Foreclosure or enforcement of security interests.
(d) Recovery of property occupied by the Corporate Debtor.

The supply of essential goods or services to the Corporate Debtor was not to be terminated during the moratorium. The moratorium would be effective until the completion of the Corporate Insolvency Resolution Process or until an order for liquidation is passed.

The matter was listed for 07.09.2018 to pass the formal order of appointment of the Interim Resolution Professional. The order was to be communicated to both parties.

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