2020 (6) TMI 332 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - pre-existing dispute or not - bone of contention raised by the Corporate Debtor is that the Operational Creditor is not entitled to receive any payment as the Operational Creditor has failed to install the equipment in the premises of the Corporate Debtor and also failed to provide adequate training to the staff of the Corporate Debtor in order to operate the said equipment. HELD THAT - A careful reading of the terms and conditions of the Purchase order manifests that the installation and training of the system will be done by the Factory trained engineers and it does not state that the payments will be made only after Installation Training of the equipments as alleged by the Corporate Debtor. Further, it may be seen that the delay in installation of the equipments in the premises of the Corporate Debtor is attributable to the Corporate Debtor as the Director of the Corporate Debtor is the one who wants the equipment to be installed in a new place and as such he has delayed in installation of the said equipment and now he cannot plead to the contrary by stating that the Operational Creditor has not installed the equipments and hence they are not entitled for any payments. Even though the Corporate Debtor has alleged that the Operational Creditor has delayed in installing the equipments at the premises of the Corporate Debtor, the Corporate Debtor has not placed on record any documents to show, nor any exchange of e-mails between the parties, in relation to the delay in installation of the equipment on the part of the Operational Creditor and as such the Corporate Debtor, with an intent only to evade the payments to be made to the Operational Creditor has raised such a contention, and furthermore the said plea was raised by the Corporate Debtor only after the issuance of the Demand Notice and as such the same cannot be termed as a pre-existing dispute - after conscientious examination of the records and taking into consideration the facts and circumstances of the case as well as the position of Law, it is considered appropriate that the Petition as filed by the Operational Creditor is required to be admitted under Section 9(5) of the IBC, 2016. Application admitted - moratorium declared.

Issues Involved:
1. Validity of the Application under Section 9 of the Insolvency & Bankruptcy Code, 2016.
2. Existence of Operational Debt and Default.
3. Alleged Failure of Installation and Training by Operational Creditor.
4. Pre-existing Dispute.
5. Appointment of Interim Resolution Professional (IRP).
6. Declaration of Moratorium.

Issue-wise Detailed Analysis:

1. Validity of the Application under Section 9 of the Insolvency & Bankruptcy Code, 2016:
The application was filed by the Operational Creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016 (I&B Code, 2016) read with Rule 6 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Tribunal found the application to be in order and admitted it under Section 9(5) of the IBC, 2016.

2. Existence of Operational Debt and Default:
The Operational Creditor claimed a sum of ?53,11,671, including interest at the rate of 18% per annum, as operational debt from the Corporate Debtor. The Tribunal noted that the Corporate Debtor had placed a purchase order dated 14.06.2017, and the Operational Creditor had supplied the materials, which were delivered to the Corporate Debtor, and an invoice was raised on 15.06.2017. The Tribunal confirmed the existence of the operational debt and default by the Corporate Debtor.

3. Alleged Failure of Installation and Training by Operational Creditor:
The Corporate Debtor contended that the Operational Creditor failed to install the equipment and provide training, which was a condition for payment. However, the Tribunal found that the terms and conditions of the purchase order did not stipulate that payment would be made only after installation and training. The delay in installation was attributed to the Corporate Debtor, who wanted the equipment installed at a new location. The Tribunal rejected the Corporate Debtor's contention, noting that the Operational Creditor's failure to install the equipment was due to the Corporate Debtor's instructions.

4. Pre-existing Dispute:
The Corporate Debtor argued that there was a pre-existing dispute regarding the installation and training of the equipment. However, the Tribunal found that the Corporate Debtor did not provide any documentary evidence or email exchanges to support this claim. The Tribunal concluded that the dispute was raised only after the issuance of the Demand Notice and was not a pre-existing dispute. The Tribunal held that the plea raised by the Corporate Debtor was not sustainable in law.

5. Appointment of Interim Resolution Professional (IRP):
Since the Operational Creditor did not propose the name of an IRP, the Tribunal appointed Ms. Ganesan Geetha as the Interim Resolution Professional based on the latest list furnished by the Insolvency and Bankruptcy Board of India (IBBI). The Tribunal directed the Operational Creditor to pay a sum of ?2,00,000 to the IRP for meeting the expenses to perform the functions assigned to her.

6. Declaration of Moratorium:
Upon admitting the application, the Tribunal declared a moratorium as envisaged under Section 14(1) of the IBC, 2016. The moratorium included the following:
- The institution or continuation of suits or proceedings against the Corporate Debtor.
- Transferring, encumbering, or disposing of any assets of the Corporate Debtor.
- Any action to foreclose or enforce any security interest.
- Recovery of any property by an owner or lessor.

The moratorium would remain in effect until the completion of the Corporate Insolvency Resolution Process (CIRP) or until an order for liquidation is passed.

Conclusion:
The Tribunal, after examining the records and hearing both parties, admitted the application filed by the Operational Creditor under Section 9 of the IBC, 2016. The Tribunal appointed an IRP and declared a moratorium, thereby initiating the Corporate Insolvency Resolution Process against the Corporate Debtor.

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