2018 (10) TMI 196 - Tri - Insolvency and Bankruptcy

Corporate insolvency proceedings - proof of default committed by Corporate Debtor - Held that - Operational Creditor is able to establish total transactions under various Purchase Orders at Rs, 164,44,016/- and amount paid by Corporate Debtor under various invoices was totalling at ₹ 1,16,67,412/- and balance is ₹ 37,76,604/- and if interest @ 24% is added, the total amount due was ₹ 79,20,558/- since it is commercial transactions, the Operational Creditor is entitled to claim interest. The payment shall be made within 35-45 days as per purchase orders. The Corporate Debtor has committed default. The Operational Creditor is able to show balance payable by Corporate Debtor along with interest. The Corporate Debtor has committed default. This Petition is filed under Section 9 of I & B Code. This is an operational debt and Corporate Debtor committed default. The Petition is in conformity with the provisions of Section 9 of the Code. Therefore, there are grounds to admit the petition and CIRP to be started against the Corporate Debtor Company. The petition is therefore to be admitted. In the result, the Adjudicating Authority admits this Petition under Section 9 of IBC, 2016, declaring moratorium for the purposes referred to in Section 14 of the Code

Issues Involved:
1. Existence of operational debt and default by the Corporate Debtor.
2. Quality of goods supplied and alleged disputes regarding the same.
3. Issuance and purpose of post-dated cheques.
4. Entitlement to interest on the outstanding amount.
5. Compliance with the procedural requirements under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Existence of Operational Debt and Default by the Corporate Debtor:
The petitioner, an Operational Creditor, supplied goods worth ?1,64,44,016/- to the Corporate Debtor, out of which ?1,26,67,412/- was paid, leaving a balance of ?37,76,604/-. The Corporate Debtor acknowledged the receipt of goods and issued post-dated cheques for the outstanding amount, which were not honored. Despite repeated requests and a demand notice, the Corporate Debtor failed to pay the remaining amount. The Corporate Debtor's claim that no amount was due was not substantiated with evidence, and the Tribunal found that the Corporate Debtor committed default in paying the operational debt.

2. Quality of Goods Supplied and Alleged Disputes:
The Corporate Debtor contended that the TMT Iron bars supplied were of substandard quality and not as per specifications, which was allegedly communicated to the Operational Creditor. However, there was no documentary evidence or prior correspondence to support this claim. The Tribunal noted that the delivery challans signed by the Corporate Debtor’s representative stated that the goods were received in good condition, contradicting the Corporate Debtor’s assertion of defective goods. The Tribunal found the dispute raised by the Corporate Debtor to be spurious and not genuine.

3. Issuance and Purpose of Post-Dated Cheques:
The Corporate Debtor argued that the post-dated cheques were issued as security and not for payment. However, the Tribunal noted that the cheques were issued two years after the supply of goods, which contradicted the claim of them being security cheques. The Tribunal concluded that the cheques were issued towards the payment of the outstanding balance, and their dishonor indicated a default by the Corporate Debtor.

4. Entitlement to Interest on the Outstanding Amount:
The Operational Creditor claimed interest at 24% per annum on the outstanding amount, totaling ?79,20,558/- including interest until the date of the demand notice. The Tribunal acknowledged the commercial nature of the transaction and the terms of supply, which entitled the Operational Creditor to claim interest on the unpaid amount. The Tribunal found the claim for interest to be justified and upheld it.

5. Compliance with Procedural Requirements under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal examined the compliance with the procedural requirements under Section 9 of the Insolvency and Bankruptcy Code, 2016. The petition was found to be in conformity with the provisions of the Code, and the demand notice was duly served on the Corporate Debtor, who did not respond or raise any dispute prior to the filing of the petition. The Tribunal concluded that the petition met the necessary requirements and admitted it.

Conclusion:
The Tribunal admitted the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. A moratorium was declared, prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor, and an Interim Resolution Professional was appointed to carry out the functions as per the Code. The order of moratorium would remain in effect until the completion of the CIRP or until a resolution plan is approved or liquidation is ordered, whichever is earlier.

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