2017 (10) TMI 34 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - eligible debt - Held that - Only after completion of the pleadings as well as arguments and when the Petition was reserved for orders, on 01.08.2017, a written submission dated 10.08.2017 it is seen had been filed on the part of the applicant in which a copy of the alleged takeover agreement dated 04.11.2016 was sought to be also included. This Tribunal is not inclined to take the said document into consideration as the same was filed subsequent to the order having been reserved and the same was not made available to the other side and thereby deprived of an opportunity to deny and counter the same. It is another matter that the respondent/ Corporate Debtor has taken a plea that even after the alleged takeover date, the Corporate Debtor claims that financial transactions have taken place between the said firm M/s J.P. Engineers and the Corporate Debtor and that the said firm continues to exist even as of today. However, in the exercise of our limited jurisdiction we are not venturing into such exercise to ascertain the existence or not of the firm M/s J.P. Engineers. Finally the reconciliation statements on which great reliance has been placed, in itself shows that the parties have not yet arrived at a definitive figure which can be considered as an ascertained debt payable as in the case of say a confirmation of balance statement or acknowledgment of debt given by a Debtor to a Creditor and which payment has been defaulted by the Corporate Debtor, thereby giving rise to CIRP under IBC, 2016. Even otherwise, in view of the summary jurisdiction as well as limited time period enjoined by IBC, 2016 on the Tribunal to either admit or reject, parties cannot seek to convert the proceedings before this Tribunal into a civil court proceeding akin to a trial making this Tribunal to go through each and every entry as reflected in the respective account books and ascertain whether there is a debt and a default has been committed warranting the initiation of CIRP

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Competency of the Operational Creditor
3. Non-compliance with statutory provisions
4. Validity of the debt and default claim

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The application to initiate CIRP was filed by an Operational Creditor against the Corporate Debtor under the Insolvency and Bankruptcy Code, 2016 (IBC, 2016). The Operational Creditor claimed that the Corporate Debtor owed them ?11,12,50,358/- for aluminum ingots and scraps supplied based on purchase orders and telephonic conversations. The Operational Creditor provided evidence of invoices and dishonored cheques as part of their claim.

2. Competency of the Operational Creditor:
The Corporate Debtor disputed the claim, arguing that the Operational Creditor lacked competency to sustain the claim on behalf of the firm J.P. Engineers. The Operational Creditor contended that they had taken over J.P. Engineers' business and thus were entitled to claim the outstanding balance. However, no documentary evidence supporting the takeover was provided until after the hearing was concluded, which the Tribunal did not consider.

3. Non-compliance with statutory provisions:
The Corporate Debtor raised preliminary objections regarding non-compliance with IBC provisions. Specifically, the notice under Section 8 of IBC was issued by an advocate without proper authorization from the Operational Creditor. The Tribunal referenced the judgment in Uttam Galva Steels Ltd. v. D.F. Deutsche Forfail AG, which held that such notices must be issued by the Operational Creditor or an authorized representative. The absence of proper authorization rendered the petition technically non-maintainable.

4. Validity of the debt and default claim:
The Tribunal scrutinized the reconciliation statements and found that the parties had not arrived at a definitive figure of debt. The Tribunal emphasized that it could not engage in detailed examination akin to a civil court trial to ascertain the exact debt and default. The Tribunal concluded that the claim lacked sufficient evidence to establish a clear debt and default, leading to the dismissal of the application.

Conclusion:
The Tribunal dismissed the application for initiating CIRP due to non-compliance with statutory provisions and insufficient evidence to substantiate the debt and default claims. The decision was based on both technical grounds and the merits of the case, highlighting the importance of proper authorization and clear documentation in insolvency proceedings.