2017 (9) TMI 1448 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency process in respect of respondent corporate debtor - Held that - A certificate dated 20/07/2017 issued by the Karur Vysya Bank, has been placed on record in which it has been confirmed that payment received through the corporate debtor in the account of operational creditor during financial year 2014-2015 and 2015-2016 is ₹ 20,34,32,000/- and last payment received on 29.12.2015. Another certificate dated 20.07.2017 issued by the Bank of India has also been placed on record in which it has been certified that payment amounting to ₹ 3,36,16,634/- from corporate debtor has not been deposited between 27.05.2017 to 20/07/2017 in the account of the Operational Creditor. The operational creditor has filed relevant bank account statements duly certified by both the Banks. In view of the above, we are satisfied that the present application is complete and the Operational Creditor is entitled to claim its dues towards the goods supplied to the corporate debtor and there has been a default in payment of the operational debt. Therefore, on fulfilment of the requirements of section 9 (5)(i)(a) to (e) of the Code, the present application is admitted. A moratorium in terms of section 14 of the Code issued. Mr. Prabhjit Singh Soni, is appointed as Interim Resolution Professional, who shall take statutory steps as envisaged under section 15, 17 and 18 of the Code. Since, the tenure of the IRP under section 16(5) shall not exceed 30 days from the date of his appointment, the IRP is directed to submit his report at the earliest but not later than 22.09.2017.

Summary

Issues Involved:
1. Application under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Outstanding dues and payment disputes.
3. Validity of demand notice under Section 8 of the Code.
4. Alleged oral settlement and payment to a third party.
5. Documentary evidence and burden of proof.
6. Admission of the application and initiation of Corporate Insolvency Resolution Process (CIRP).
7. Issuance of moratorium.

Issue-wise Detailed Analysis:

1. Application under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, along with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor.

2. Outstanding dues and payment disputes:
The operational creditor supplied rice and paddy worth ?37,21,60,517 to the corporate debtor. Payments amounting to ?33,85,43,883 were received, leaving an outstanding amount of ?3,36,16,634. Despite several reminders, the corporate debtor failed to pay the remaining dues. The operational creditor claimed a total of ?7,51,40,575, including interest till May 26, 2017.

3. Validity of demand notice under Section 8 of the Code:
The operational creditor issued a demand notice on June 10, 2017, under Section 8 of the Code. The notices sent to the corporate debtor's registered office and directors were returned undelivered, except for those sent to the company secretary and an ex-director. The respondent argued that the demand notice was defective as it lacked mandatory attachments. However, the tribunal found that the statutory demand notices were duly sent and contained necessary attachments, including a bank statement, copy of the last invoice, last cheque received, and the company's ledger account.

4. Alleged oral settlement and payment to a third party:
The corporate debtor claimed an oral settlement where it was agreed to pay the outstanding dues to S.K.K. Agro Pvt. Ltd. The operational creditor denied any such settlement and stated that S.K.K. Agro Pvt. Ltd. was unrelated to them. The tribunal noted that the burden of proof for the alleged oral settlement lay with the corporate debtor, which failed to provide any documentary evidence or details of the meetings where the settlement was allegedly agreed upon.

5. Documentary evidence and burden of proof:
The tribunal emphasized that the corporate debtor failed to provide any documentary evidence to support its claim of payment to a third party. No bank transaction details or records of the alleged settlement were provided. The tribunal reiterated that the burden of proof lay with the corporate debtor, which failed to substantiate its claims.

6. Admission of the application and initiation of Corporate Insolvency Resolution Process (CIRP):
The tribunal found that the application was complete and the operational creditor was entitled to claim its dues. The requirements of Section 9(5)(i)(a) to (e) of the Code were fulfilled, and the application was admitted. The tribunal appointed an Interim Resolution Professional (IRP) to take statutory steps as per Sections 15, 17, and 18 of the Code.

7. Issuance of moratorium:
A moratorium under Section 14 of the Code was issued, prohibiting the institution or continuation of suits, transferring or disposing of assets, foreclosing or recovering any security interest, and recovering any property occupied by the corporate debtor. The supply of essential goods or services to the corporate debtor was to continue uninterrupted during the moratorium period. The IRP was directed to submit a report within 30 days from the date of appointment.

Conclusion:
The tribunal admitted the application for initiating the CIRP against the corporate debtor, issued a moratorium, and appointed an IRP to proceed with the resolution process. The corporate debtor's contentions regarding the demand notice and alleged oral settlement were found to be unsubstantiated and lacking documentary evidence.