2021 (5) TMI 514 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - suit for for supplying inferior quality of goods to the applicant - existence of debt and dispute or not - HELD THAT - The main objection raised by the respondent (point No. 3 -page 4 to the reply) is that the petitioner firm had filed a suit No. 3201 of 2019, on 03.12.2019, before the Hon'ble Judge of Bombay Civil Court against one Amivarsha Industries for supplying inferior quality of goods to the applicant, which, in turn, would have been supplied to the respondent company - Such plea raised by the respondent cannot be considered as a pre-existing dispute, because the said dispute is between the applicant and a third party viz. Amivarsha Industries and it has nothing to do with the respondent. Similarly, any dispute between the applicant and a third party regarding quality, quantity and nonpayment to the third party Amivarsha Industries cannot be considered as a reason for non-payment of the debt of the applicant by the respondent. The Adjudicating Authority is only required to consider whether there is any default and the debt is due and payable. In the instant case, the applicant has placed on record enough documents evidencing the default and hence, the present application deserves to be admitted - On perusal of the record it is also found that the instant petition filed by the applicant is well within limitation and there is no pre-existing dispute regarding the operational debt from the side of the corporate debtor. In the instant application, from the material placed on record by the Applicant, this Authority is satisfied that the application is complete in all respect and the Corporate Debtor committed default in paying the operational debt due and payable to the Applicant - The documents produced by the operational creditor clearly establish the 'debt' and there is default on the part of the Corporate Debtor in payment of the 'operational debt'. This adjudicating authority is of the considered view that operational debt is due to the Applicant and it fulfilled the requirement of I B Code. No dispute has been raised by the respondent at any point of time. That, Applicant is an Operational Creditor within the meaning of Section 5 sub-section 20 of the Code. From the aforesaid material on record, petitioner is able to establish that there exists debt as well as occurrence of default and the amount claimed by operational creditor is payable in law by the corporate debtor as the same is not barred by any law of limitation and/or any other law for the time being in force. The corporate debtor has committed default in payment of operational debt and, therefore, it is a fit case to initiate Insolvency Resolution Process by admitting the Application under Section 9(5)(1) of the Code - Application admitted - moratorium declared.

Summary

Issues Involved:
1. Existence of operational debt.
2. Default in payment of operational debt.
3. Pre-existing dispute.
4. Compliance with procedural requirements under the Insolvency and Bankruptcy Code, 2016 (IBC).

Detailed Analysis:

1. Existence of Operational Debt:
The applicant, a sole proprietor of a firm dealing in cotton supply, filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, claiming an outstanding operational debt from the respondent, a private limited company. The applicant provided detailed evidence including tax invoices, e-way bills, and ledger accounts to substantiate the claim of an operational debt amounting to ?1,18,39,134/- which includes interest from 22.11.2019 to 03.03.2020. The respondent acknowledged the commission payable and certain amounts due via email dated 15.12.2019.

2. Default in Payment of Operational Debt:
The applicant stated that despite multiple efforts, the respondent failed to make the payment of the outstanding operational debt. A demand notice was issued on 03.03.2020, but the respondent did not comply. The tribunal found that the applicant had provided sufficient documentary evidence to establish the default. The tribunal emphasized that the existence of debt and occurrence of default were clearly demonstrated by the documents presented.

3. Pre-existing Dispute:
The respondent raised several objections, including the existence of a pre-existing dispute due to a suit filed by the applicant against a third party for supplying inferior goods. The tribunal held that this dispute with a third party could not be considered a pre-existing dispute affecting the respondent’s obligation to pay the operational debt. Other objections raised by the respondent, such as non-confirmation of ledger accounts and alleged mistakes in the petition, were deemed illusory and unsustainable in the eye of law.

4. Compliance with Procedural Requirements:
The tribunal confirmed that the application was complete in all respects and within the limitation period. It referred to the Supreme Court judgment in Mobilox Innovative Private Limited vs. Kirusa Software Private Limited, which outlines the criteria for admitting an application under Section 9 of the IBC. The tribunal concluded that all conditions were met: the operational debt exceeded ?1 lakh, the debt was due and payable, and there was no pre-existing dispute.

Conclusion:
The tribunal admitted the petition, initiating the Corporate Insolvency Resolution Process (CIRP) against the respondent. A moratorium was declared prohibiting the institution or continuation of suits, transferring of assets, and recovery actions against the corporate debtor. An Interim Resolution Professional (IRP) was appointed to manage the process, and the applicant was directed to pay an advance to the IRP for smooth conduct of CIRP. The order emphasized that the supply of essential services to the corporate debtor should not be interrupted during the moratorium period. The registry was instructed to inform the Registrar of Companies about the initiation of CIRP to prevent any detrimental actions against the corporate debtor.