2022 (3) TMI 752 - 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 - The corporate debtor has not filed any settlement agreement executed between the parties in respect of alleged mutual arrangements. The corporate debtor further has failed to demonstrate any pre-existing dispute between the parties regarding claim of the applicant. Time limitation - HELD THAT - It is seen that there was a running account between the parties and the corporate debtor has not paid amounts in respect of individual invoices. In fact the corporate debtor has admitted its liability to pay the dues towards applicant vide reply to demand notice as well - In the facts it is seen that the applicant clearly comes within the definition of Operational Creditor as the Corporate Debtor itself has admitted the fact of receiving goods supplied by the applicant. On a bare perusal of Form-5 filed under Section 9 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. An application under Section 9 of the Code is acceptable so long as the debt is proved to be due and there has been occurrence or existence of default. In respect of applications filed before 24.03.2020 what is material is that the default is for at least ₹ 1 Lakh. In view of Section 4 of the Code, the moment default is of Rupees one lakh or more, the application to trigger Corporate Insolvency Resolution Process under the Code is maintainable. The corporate debtor has failed to show that there is no debt or default in existence so as to avoid the provisions of the Code - the corporate debtor has failed to demonstrate that any pre-existing dispute between the parties infact the corporate debtor has admitted its liability. Therefore, the present application deserves to be allowed. Application admitted - moratorium declared.

Summary

Issues:
- Application under Section 9 of the Insolvency and Bankruptcy Code, 2016
- Liability of the corporate debtor towards the applicant
- Objections raised by the corporate debtor
- Consideration of limitation period
- Appointment of Interim Resolution Professional
- Declaration of moratorium

Analysis:
1. The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, by M/s. R.R. Distributers Private Limited to initiate the Corporate Insolvency Resolution Process against M/s. Kanodia Technoplast Limited. The applicant claimed that the corporate debtor admitted liability for a substantial amount due and payable.

2. The petitioner alleged that the corporate debtor had outstanding payments amounting to a significant sum. Despite some payments made by the corporate debtor, a substantial balance remained unpaid as per the applicant's claims.

3. The corporate debtor raised objections to the admission of the petition, citing issues such as limitation periods for certain invoices, lack of agreement on interest, and alleged mutual settlement agreements regarding payment installments.

4. The Tribunal considered the arguments presented by both parties, noting that the corporate debtor failed to provide evidence of any settlement agreements or pre-existing disputes that would invalidate the applicant's claims.

5. Regarding the limitation period, the Tribunal found that there was a running account between the parties, and the corporate debtor had acknowledged its liability by responding to the demand notice without raising any disputes.

6. The Tribunal determined that the applicant qualified as an Operational Creditor, and the application met the requirements under Section 9 of the Code. The default amount exceeded the threshold for initiating the Corporate Insolvency Resolution Process.

7. Consequently, the Tribunal ruled in favor of the applicant, allowing the application to proceed. Mr. Navjit Singh was appointed as the Interim Resolution Professional, subject to certain conditions, and the applicant was directed to deposit a specified amount for the professional's expenses.

8. In line with the Code, the Tribunal declared a moratorium, imposing restrictions on legal actions against the corporate debtor, asset transfers, and property recovery. Exceptions were outlined for essential transactions and certain parties, as specified under the Code.

9. The Interim Resolution Professional was tasked with specific responsibilities under the Code, including managing the affairs of the corporate debtor, with obligations for cooperation and asset preservation outlined for all relevant parties.

10. The Tribunal directed the communication of the order to the involved parties promptly, ensuring compliance and awareness of the decisions made in the judgment.