2020 (9) TMI 509 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - The contentions of the Corporate Debtor that in view of the settlement entered into between the Vira Group and sunshine Group, the Corporate Debtor herein is not liable for the amount claimed in this petition based on the Clause 9.5 of the settlement memo dated 31/10/2018. We are unable to accept the contention of the Corporate Debtor that the Corporate debtor is not liable to the petitioner. The petitioner was not a party to the settlement entered into between the Vira Group and Sunshine Group. The corporate debtor has not raised any dispute with regard to the debt or quality of goods supplied. The debt and default on the part of the Corporate debtor is writ large in the petition and in fact the Corporate debtor himself is ready to returned back some of the unutilised goods remaining with them to the petitioner. This Bench having been satisfied with the Petition filed by the Petitioner which is in compliance of provisions of section 9 of the Insolvency and Bankruptcy Code admits this Petition declaring moratorium - Petition admitted.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Validity of demand notice and default
3. Applicability of Usurious Loans Act, 1918
4. Liability of new management for debts incurred by previous management
5. Admissibility of interest rate claimed by the petitioner

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petitioner, Spartan Engineering Industries Pvt. Ltd., filed a petition against Sivana Realty Pvt. Ltd. under Section 9 of the Insolvency & Bankruptcy Code, 2016, alleging default in payment amounting to ?17,80,470/-. The petition was found to be in compliance with the provisions of Section 9 of the Code, leading to its admission and the declaration of a moratorium.

2. Validity of Demand Notice and Default:
The petitioner sent a demand notice under Section 8 of the Code on 26/07/2019, which was returned undelivered. Subsequently, the notice was sent via email on 06/08/2019, to which the Corporate Debtor did not respond or make any payment. The Corporate Debtor did not dispute the debt or the quality of goods supplied, and even offered to return the unutilized goods, indicating acknowledgment of the debt.

3. Applicability of Usurious Loans Act, 1918:
The Corporate Debtor contended that the interest rate of 24% per annum claimed by the petitioner was usurious and should be set aside under the Usurious Loans Act, 1918. The tribunal, however, rejected this contention, stating that the interest rate was not excessive or exorbitant considering current market conditions. The tribunal referenced multiple judgments to assert that NCLT has the jurisdiction to apply the Usurious Loans Act, but found no grounds to reduce the interest rate in this case.

4. Liability of New Management for Debts Incurred by Previous Management:
The Corporate Debtor argued that due to a settlement between the Vira Group and the Sunshine Group, the new management (Vira Group) should not be held liable for debts incurred by the previous management (Sunshine Group). The tribunal dismissed this argument, noting that the petitioner was not a party to the settlement and the Corporate Debtor had not disputed the debt. The tribunal emphasized that the new management could not evade liability for the debts of the Corporate Debtor.

5. Admissibility of Interest Rate Claimed by the Petitioner:
The tribunal upheld the petitioner's claim for interest at the rate of 24% per annum on delayed payments, rejecting the Corporate Debtor's argument that it was usurious. The tribunal concluded that the interest rate was reasonable and enforceable under the circumstances.

Conclusion:
The tribunal admitted the petition, declared a moratorium, and appointed an Interim Resolution Professional (IRP) to carry out the functions as per the Code. The order prohibits the initiation or continuation of suits against the Corporate Debtor and ensures the supply of essential goods and services during the moratorium period. The tribunal directed the registry to communicate the order to both parties and the IRP immediately.

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