2021 (4) TMI 1146 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Time Limitation - HELD THAT - Contention raised by the corporate debtor in respect that Mr. Manish Narayan Saboo is not authorized by the board of the corporate debtor for filing the present application is not valid. The contention of the corporate debtor in respect that the present application is barred by limitation is also not valid. The first invoice was raised on 27.02.2016, and the last invoices raised on 20.07.2016, and the present application was filed before this authority on 14.02.2019 which is well within the limitation, i.e. 2 years 11 months, and 18 days. It is also noted that the ground raised by the corporate debtor that there is a pre-existing dispute because goods supplied by the operational creditor to the corporate debtor were defective as alleged. This ground is baseless as there being no supporting documents. If there was any pre-existing dispute that must be raised before filing this present application. In the present application, no other document is produced on record by the corporate debtor to prove the preexisting debt - There can so many reasons for rejection of goods by a third party and there is no such condition between Operational Creditor/Corporate Debtor that payment would be refunded only after goods are accepted by the client of Corporate Debtor. The corporate debtor further relies upon the letter issued by the M/s. General Polytex on 24.09.2019 which has been issued after filing the present application in respect that the goods supplied by the operational creditor were defective. It is also not indicated that the alleged facts were communicated to the operational creditor. An averment made by the operational creditor can't be sustained without any cogent evidence. Hence, this contention of the corporate debtor is also rejected. The present application is defect-free and complies with the relevant provisions of the IB Code and Rules formed thereunder - Application admitted - moratorium declared.

Summary

Issues:
1. Application under Section 9 of the Insolvency & Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process initiation.
2. Dispute over outstanding amount between Operational Creditor and Corporate Debtor.
3. Validity of the application, authorization of the applicant, and limitation period.
4. Allegations of defective goods and adjustments made by the Corporate Debtor.
5. Appointment of Resolution Professional and directions for the Corporate Insolvency Resolution Process.

Analysis:
1. The application was filed by the Operational Creditor under Section 9 of the Insolvency & Bankruptcy Code to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor for an outstanding amount. The Operational Creditor claimed non-payment despite supplying goods and issuing invoices, leading to the initiation of the legal process.

2. A dispute arose over the outstanding amount, with the Corporate Debtor alleging adjustments due to defective goods supplied by the Operational Creditor. The Corporate Debtor raised concerns about the validity of the application, authorization of the applicant, and the limitation period for filing the application, presenting a defense against the claims made by the Operational Creditor.

3. The Tribunal examined the validity of the application, including the authorization of the applicant, and found that the application was in compliance with the relevant provisions of the Insolvency & Bankruptcy Code. The Tribunal dismissed the Corporate Debtor's arguments regarding authorization and limitation, determining that the application was timely and legally sound.

4. The Corporate Debtor's allegations of defective goods and adjustments made were scrutinized by the Tribunal. The Tribunal rejected the Corporate Debtor's contentions, noting that there was no substantial evidence supporting the claims of defective goods and adjustments. The Tribunal found the Corporate Debtor's defense to be unsubstantiated and raised after the fact to avoid liability.

5. The Tribunal allowed the application, admitted it, and declared a moratorium under Section 14(1) of the Code. The Tribunal appointed a Resolution Professional from the IBBI Panel of Insolvency Professionals and issued directions for the Corporate Insolvency Resolution Process, including the protection of assets, submission of claims, and continuation of supplies during the moratorium period. The Tribunal also directed the Operational Creditor to pay an advance to the IRP for the smooth conduct of the process.