2017 (7) TMI 1420 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT - This debtor company having come out of reference on 01.12.2016, since the claim of this Creditor has risen while the debtor was continuing as sick unit, this claim is claimable from the date BIFR proceedings have been stood as abated, whereby this Bench hereby holds that the claim raised by the Creditor is well within the limitation. So far this company has not initiated any proceedings before this Bench seeking any relief to claim as stated in the eighth schedule of I B Code, therefore we hold that this claim is within limitation. It is an admitted fact that this Corporate Debtor has not raised any dispute either by filing any suit or any proceeding in respect to of the quality of goods, therefore, this appears as a defense set up for the sake of frustrating this claim, but not basing on any dispute as required under I B Code. The Creditor in this case has not claimed any interest over the value of the goods supplied in the year 2011-12, he has only added the arrears of the interest that is payable by the Corporate Debtor for delay that has happened in making payment in respect to earlier invoices in 2010-11. Since it has been showing in the accounts maintained by the applicant, we believe that this Creditor is entitled to claim the arrears of interest i.e. Rs. 10,70,400 over the dues of the year 2010-2011. To prove this claim, the Creditor having filed invoices for the goods supplied to the Corporate Debtor, as to default is concerned, since the Corporate Debtor himself has taken ground that the claim is barred by limitation, the Creditor having disclosed that no payment has been made by the Corporate Debtor herein and the same not being disputed by the debtor, it can be said without any further proof that this Corporate Debtor defaulted in making payment of the Claim made by the Creditor. This debt is barred by limitation, that goods are of inferior quality, and those pleas being turned down, we hold that this case is fit for initiation of insolvency resolution process - Petition admitted - moratorium declared.

Summary

Issues:
- Initiation of Insolvency Resolution Process under Section 9 of The Insolvency and Bankruptcy Code based on default in payment.
- Interpretation of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 in relation to claims against a sick company.
- Consideration of defenses raised by the Corporate Debtor regarding quality of goods and limitation of claims.
- Entitlement of the Creditor to claim arrears of interest for delayed payments.
- Decision on initiation of insolvency resolution process and related relief measures.

Analysis:
1. Initiation of Insolvency Resolution Process: The Company Petition was filed by the Operational Creditor against the Corporate Debtor for defaulting in payment for goods supplied. The claim included the principal amount and arrears of interest. The Corporate Debtor raised defenses related to the quality of goods and limitation of claims, but the Tribunal found them unsubstantiated as no disputes were raised earlier.

2. Interpretation of Section 22 of SICA: The Tribunal analyzed the applicability of Section 22 of SICA concerning the suspension of legal proceedings against a sick company. It was noted that the language of the section is wide and that the suspension applies to dues included in a sanctioned rehabilitation scheme. Since no such scheme existed in this case, the claim was not covered by the suspension.

3. Defenses Raised by Corporate Debtor: The Corporate Debtor's defenses regarding the quality of goods and limitation of claims were dismissed as belated and lacking in merit. The Tribunal emphasized that the Corporate Debtor failed to dispute the non-payment of dues, leading to the decision that the claim was valid and within the limitation period.

4. Entitlement to Arrears of Interest: The Creditor was found entitled to claim arrears of interest for delayed payments, as supported by invoices and the admission of non-payment by the Corporate Debtor. The Tribunal held that the claim for interest was valid and could be pursued.

5. Decision on Insolvency Resolution Process: Based on the evidence presented and the lack of valid defenses from the Corporate Debtor, the Tribunal ruled in favor of initiating the insolvency resolution process. Relief measures were granted, including a moratorium on legal actions against the Corporate Debtor and the appointment of an Interim Resolution Professional.

In conclusion, the Tribunal admitted the Company Petition, prohibited legal actions against the Corporate Debtor, and initiated the insolvency resolution process based on the default in payment and the validity of the Creditor's claim. The decision was supported by the interpretation of relevant legal provisions and the assessment of the defenses raised by the Corporate Debtor.