2019 (9) TMI 1667 - AT - Insolvency and Bankruptcy

Recovery of amount of Corporate Debtor by Resolution Professional - Appellant has not deposited the amount in a separate Escrow Account - HELD THAT - Having found that the Appellant has sold the goods supplied by Corporate Debtor, the ground taken by the Appellant that the goods were sub-standard, cannot be accepted. In absence of any merit and as the Appellant has not complied with the interim direction of this Appellate Tribunal, no relief can be granted - Appeal dismissed.

Summary

Issues:
Corporate Insolvency Resolution Process - Recovery of outstanding amount from debtor - Non-compliance with interim order to deposit amount in Escrow Account - Dispute over quality of goods supplied and payment terms in Purchase Order.

Analysis:
1. The Resolution Professional initiated Corporate Insolvency Resolution Process against a company seeking to recover an outstanding amount of Rs. 10,36,91,319 from a debtor. The Adjudicating Authority, after reviewing financial reports and purchase records, found the debtor liable to pay the said amount to the Corporate Debtor.

2. The debtor argued that the purchase order had specific conditions regarding payment release, and due to quality and quantity variances, certain deductions were applicable. The debtor also claimed to have informed the Corporate Debtor about sub-standard materials received and requested replacements, which were not fulfilled.

3. Despite the debtor's claims, the Adjudicating Authority observed that the debtor had accepted and sold the goods supplied by the Corporate Debtor, including the allegedly sub-standard ones. Consequently, the Authority directed the debtor to pay the outstanding amount with interest for delayed payment.

4. The Appellate Tribunal, while considering the matter, issued an interim order directing the debtor to keep the disputed amount in a separate Escrow Account. However, the debtor failed to comply with this order, leading to further legal proceedings.

5. The Liquidator informed the Tribunal that the debtor had not deposited the amount in the Escrow Account as directed. Additionally, the debtor's appeal to the Supreme Court against the interim order was rejected.

6. The Appellate Tribunal, after reviewing the facts and submissions, found that the debtor had sold the goods received from the Corporate Debtor, thereby rejecting the debtor's claim of sub-standard quality. Due to the debtor's non-compliance with the Tribunal's interim order and lack of merit in their arguments, the Tribunal dismissed the appeal, upholding the Adjudicating Authority's decision to recover the outstanding amount.

7. The Tribunal concluded that since the debtor had sold the goods without returning them to the Corporate Debtor, and in light of their failure to comply with the Tribunal's directions, no relief could be granted. Therefore, the appeal was dismissed without any costs imposed.