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2021 (6) TMI 207 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT - It is seen that the breakage of glass as per the report given by the glass manufacturers cannot be construed as a deficiency in service on the part of the Operational Creditor and thereby giving rise to a 'dispute' which is existing between the parties. In fact after the issue of the breakage of glass, the Corporate Debtor has issued a cheque to the Operational Creditor on 23.11.2017 and on presentation, the same was returned with an endorsement funds insufficient - Further it is seen from the records of the proceedings dated 22.02.2021, 22.03.2021 and 16.04.2021 the Corporate Debtor has sought time under the garb of settlement as the Respondent/Corporate Debtor was taking every effort to settle the matter between the parties amicably and sought for adjournments on the said pretext. Finally when the matter came up for hearing on 16.04.2021, the Corporate Debtor again sought for an adjournment on the pretext that a draft memo in relation to the settlement is yet to be finalized. However, this Tribunal was not inclined to grant any further adjournment and reserved the matter for orders. The Operational Creditor has proved the debt is due and payable by the Corporate Debtor and that the Corporate Debtor has committed default in payment of the said operational debt to the Operational Creditor. Further, the defence as set out by the Corporate Debtor also does not hold any merit in view of the report submitted by the Glass manufacturer stating that the breakage of glass was not due to the manufacturing defect but it is an inherent risk or problem associated with use of tempered glass. Application admitted - moratorium declared.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016. 2. Existence of an operational debt and default by the Corporate Debtor. 3. Dispute raised by the Corporate Debtor regarding the quality of work and breakage of glass. 4. Jurisdiction and limitation period for filing the application. 5. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium. Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP): The application was filed by an Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking to initiate the CIRP against the Corporate Debtor. 2. Existence of Operational Debt and Default: The Operational Creditor claimed a sum of ?22,49,958.60, which included a principal amount of ?15,71,734 and interest at the rate of 24% per annum. The debt was supported by documents such as work orders, outstanding invoices, a work completion certificate, and mail communications acknowledging the debt. Despite the MSME council order in favor of the Operational Creditor, the Corporate Debtor failed to pay the outstanding amount. 3. Dispute Raised by the Corporate Debtor: The Corporate Debtor contended that there was a dispute regarding the quality of work, specifically mentioning glass breakages and discrepancies in the work done. However, the Tribunal found this defense to be patently feeble. The breakage of glass was determined to be an inherent risk associated with tempered glass, not a manufacturing defect, as per the report from the glass manufacturer, Saint-Gobain. The Tribunal noted that the Corporate Debtor had issued cheques that were returned due to insufficient funds, further indicating the default. 4. Jurisdiction and Limitation Period: The application was filed on 24.06.2019, and the last invoice date was 13.12.2016, placing the application within the limitation period. The pecuniary jurisdiction was also confirmed as the application was filed before the jurisdiction enhancement from ?1 lakh to ?1 crore on 24.03.2020. 5. Appointment of Interim Resolution Professional (IRP) and Declaration of Moratorium: Since the Operational Creditor did not propose the name of an IRP, the Tribunal appointed Mr. Arpit Kothari as the IRP. The moratorium under Section 14 of the IBC was declared, which included prohibitions on the institution or continuation of suits, transferring assets, and recovery actions against the Corporate Debtor. The Tribunal directed the Operational Creditor to pay ?2,00,000 to the IRP for expenses. Conclusion: The Tribunal admitted the application under Section 9(5) of the IBC, 2016, and initiated the CIRP against the Corporate Debtor. The moratorium came into effect immediately, and the IRP was directed to take necessary actions as per the IBC regulations. The order was communicated to relevant parties and authorities for further proceedings.
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