2021 (3) TMI 299 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate debtor committed default in paying the operational debt - Service of demand notice - pre-existing dispute or not - HELD THAT - It is not in dispute that the operational creditor supplied the material sought for by the corporate debtor. Some of the materials delivered after 9 months from the date of purchase order. In purchase order the said material was claimed within 15 days from its date and the purchase order was supported with the PDC for the price of the goods supplied. In view of the above facts, it is to be held that the goods were supplied by inordinate delay - The operational creditor vide letter dated July 25, 2017 acknowledged short fall of the goods, which was prior to the demand notice but the fact remained on record is that later on the remaining goods were supplied by the operational creditor and corporate debtor accepted the same without any protest. It shows that the corporate debtor gave us its dispute relating to late delivery and now they cannot use that fact as defence. Service of Demand Notice - HELD THAT - It is now well-settled law that delivery of demand notice under section 8 of the Insolvency and Bankruptcy Code, 2016 is sine qua non for initiating the corporate insolvency resolution process of under section 9 of the Insolvency and Bankruptcy Code, 2016 against the corporate debtor - It has consistently been hold by the hon'ble National Company Law Appellate Tribunal that non-delivery of the demand notice to the corporate debtor is the ground to reject the application under section 9 of the Insolvency and Bankruptcy Code, 2016 - In the present case, the demand notice was rightly sent to the registered office of the corporate debtor. Postal track report in this regard shows that the notice was served upon the corporate debtor. It is not in dispute that the corporate debtor did not reply the notice within 10 days raising any dispute. The operational creditor filed the affidavit stating that the they did not receive reply of the notice from the corporate debtor pointing out any disputes. They did not receive the payment as claimed by them and thereby compliance provision section 9(3)(b) and (c) of the Insolvency and Bankruptcy Code, 2016. The application is defect free - The application is admitted and the moratorium is declared.

Issues:
1. Application under section 9 of the Insolvency and Bankruptcy Code, 2016 for corporate insolvency resolution process.
2. Dispute regarding non-payment of operational debt by the corporate debtor.
3. Validity of demand notice under section 8 of the Insolvency and Bankruptcy Code, 2016.
4. Appointment of interim resolution professional (IRP) and initiation of corporate insolvency resolution process (CIRP).

Issue 1: Application under section 9 of the Insolvency and Bankruptcy Code, 2016 for corporate insolvency resolution process:
The operational creditor filed an application under section 9 of the Insolvency and Bankruptcy Code to initiate the corporate insolvency resolution process against the corporate debtor for defaulting on an operational debt of ?13,24,748. The operational creditor supplied the materials as per the purchase order, but some items were delivered after a significant delay, leading to a dispute regarding the timeliness of delivery.

Issue 2: Dispute regarding non-payment of operational debt by the corporate debtor:
The corporate debtor raised defenses claiming that the operational creditor did not supply the goods ordered on time, resulting in losses, and that they had disputed the late delivery before the demand notice was served. However, the tribunal found that the corporate debtor accepted the remaining goods without protest, indicating that the dispute over late delivery was no longer valid. The tribunal held that the demand notice was served correctly, and the corporate debtor failed to respond within the stipulated time, justifying the initiation of the corporate insolvency resolution process.

Issue 3: Validity of demand notice under section 8 of the Insolvency and Bankruptcy Code, 2016:
The corporate debtor contended that the demand notice was not served upon them, citing various judgments to support their argument. However, the tribunal established that the demand notice was sent to the registered office of the corporate debtor and was duly served, as evidenced by the postal track report. The tribunal emphasized the importance of delivering the demand notice for initiating the insolvency resolution process.

Issue 4: Appointment of interim resolution professional (IRP) and initiation of corporate insolvency resolution process (CIRP):
The tribunal admitted the application, declared a moratorium, and appointed an IRP to oversee the corporate insolvency resolution process. The IRP was directed to perform various functions as per the Insolvency and Bankruptcy Code. Additionally, the tribunal ordered the IRP to make a public announcement of the CIRP, manage the operations of the corporate debtor, and ensure the continuation of supplies during the moratorium period. The operational creditor was instructed to pay an advance to the IRP for the smooth conduct of the CIRP.

In conclusion, the tribunal admitted the application, appointed an IRP, and initiated the corporate insolvency resolution process based on the non-payment of operational debt by the corporate debtor and the valid service of the demand notice. The moratorium was declared, and necessary steps were taken to protect the interests of all parties involved in the resolution process.

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