2017 (8) TMI 390 - Tri - Insolvency and Bankruptcy

Corporate insolvency procedure - Insolvency and Bankruptcy code - iniquity of corporate debtor claim - Held that - The claim made by the Corporate Debtor is not genuine. As perused the documents placed on the file including the bank statement and the affidavit in compliance to Section 9(3)(b) and (c) of the I&B Code, 2016. In the affidavit the Operational Creditor stated that the objections/dispute raised by the Corporate Debtor is not a valid and genuine dispute and the Corporate Debtor is falsely objecting to the same in order to evade the liability to pay the outstanding debt. Therefore, having been satisfied that all the requirements under law have been fulfilled, we are inclined to admit the Petition and order the commencement of the Corporate Insolvency Resolution Process which ordinarily shall get completed within 180 days, reckoning from the day this order is passed. The Operational Creditor did not propose the name for appointment of Interim Insolvency Professional. Therefore, we direct the Registry to make a reference to the IBBI for recommending the name an Interim Insolvency Professional within 10 days of the reference. However, we declare the moratorium which shall have effect from the date of this Order till the completion of Corporate Insolvency Resolution Process, for the purposes referred to in Section 14 of the I&B Code, 2016. The supply of essential goods or services of the Corporate Debtor shall not be terminated or suspended or interrupted during moratorium period. The provisions of Sub-section (1) of Section 14 shall not apply to such transactions, as notified by the Central Government. On receiving the recommendation of the IBBI, the Registry is directed to place the matter before this Bench for appointing the Interim Insolvency Professional as recommended by the IBBI.

Issues:
Adjudication of insolvency petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 based on outstanding debt claim and dispute raised by the Corporate Debtor regarding consignment quality and price adjustments.

Detailed Analysis:

1. Outstanding Debt Claim:
The Operational Creditor filed an application against the Corporate Debtor claiming an outstanding debt of USD 445416 that fell due on 03.02.2016. The Corporate Debtor accepted the consignment without objection initially but later raised issues regarding the quality of the material received. However, the Sale Purchase Agreement specified that any price adjustment must be based on Gross Calorific Value (GCV) and not on Sulphur content alone. The Corporate Debtor's objections were deemed unsustainable as per the terms of the contract.

2. Genuine Dispute Raised by Corporate Debtor:
The Corporate Debtor raised objections regarding the quality of the consignment and the rate of interest claimed by the Operational Creditor. However, the Tribunal found these objections to be illusory and not genuine disputes. The terms and conditions of the Sale Purchase Agreement were clear, and the objections raised by the Corporate Debtor were considered devoid of merit.

3. Interpretation of "Dispute" under I&B Code:
The Tribunal referred to judgments by the Hon'ble NCLAT regarding the interpretation of the term "dispute" under the Insolvency and Bankruptcy Code. The judgments emphasized that a genuine dispute must be raised before a court or authority and cannot be an afterthought raised to avoid payment obligations. The Tribunal concluded that the objections raised by the Corporate Debtor did not constitute a genuine dispute.

4. Legal Arguments Raised by Corporate Debtor:
The Corporate Debtor referred to legal rulings regarding breach of contract and charging of exorbitant interest rates. However, these arguments were found to be irrelevant to the case at hand as there was no breach of contract by the Operational Creditor, and the Act cited by the Corporate Debtor did not apply to commercial transactions.

5. Admission of Insolvency Petition:
After reviewing the documents, including bank statements and affidavits, the Tribunal found that all legal requirements had been fulfilled. The objections raised by the Corporate Debtor were considered invalid, and the Tribunal decided to admit the petition, commencing the Corporate Insolvency Resolution Process for a period of 180 days.

6. Moratorium and Appointment of Insolvency Professional:
The Tribunal declared a moratorium on certain actions against the Corporate Debtor and directed the Registry to recommend the appointment of an Interim Insolvency Professional. Essential goods or services supply to the Corporate Debtor was protected during the moratorium period.

7. Final Orders:
The Tribunal admitted the application, directed communication of the order to both parties, and ordered the commencement of the Corporate Insolvency Resolution Process. The matter of appointing the Interim Insolvency Professional was to be decided based on the recommendation of the IBBI.

In conclusion, the judgment resolved the issues surrounding the outstanding debt claim, dispute raised by the Corporate Debtor, interpretation of "dispute" under the I&B Code, legal arguments presented, admission of the insolvency petition, imposition of a moratorium, and appointment of an Insolvency Professional.

← Previous Next →