2022 (4) TMI 1109 - 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 - HELD THAT - The case of respondent is that dispute was raised about quality of the goods supplied by the operational creditor. However, it is seen that the corporate debtor has even paid partly by settling before Ld. MM, Tiz Hazari. Therefore, the contention of corporate debtor regarding disputes cannot be considered. It is clearly established that the default in payment of the operational debt has occurred by the corporate debtor. Though the corporate debtor has raised dispute with regards the defective goods, but has not placed on record any document which proves the invoices were disputed. In view of the cheques issued and amount paid by corporate debtor. There is no merit in the so-called dispute raised by the corporate debtor as mere reply filed by the corporate debtor to the present application, is unable to establish any pre-existing dispute of genuine nature. This leaves no doubt that the default has occurred for the payment of the operational debt to the applicant and the so called dispute raised by the corporate debtor is merely a moonshine dispute. The applicant has established its claim which is due and payable by the corporate debtor. The present application is admitted - moratorium declared.

Summary

Issues:
Application for initiation of CIRP under Section 9 of IBC 2016 based on alleged default by Corporate Debtor in payment for supplied goods.

Analysis:
1. The Operational Creditor, a footwear manufacturer, filed an application seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, a sports company, for non-payment of an outstanding balance of ?31,08,473 for supplied footwears. Invoices were raised, emails were exchanged for payment demands, and bank statements were submitted as evidence of non-payment.

2. The Corporate Debtor contended that the goods supplied had defects affecting revenue, but the Operational Creditor failed to address quality issues. The Corporate Debtor partially settled a previous balance before a District Court, emphasizing disputes raised prior to the demand notice issuance.

3. The Operational Creditor refuted the quality allegations, highlighting the absence of proof of inferior goods intimation. Security cheques issued by the Corporate Debtor bounced, leading to pending legal cases.

4. After hearing both parties and reviewing the case records, it was found that despite quality disputes raised by the Corporate Debtor, partial payment was made, indicating a default in payment. The Corporate Debtor's claims lacked substantial evidence, and the Operational Creditor's claim was deemed valid.

5. The Tribunal referenced the "Mobilox Innovative Private Limited vs. Kirusa Software Private Limited" case, emphasizing the need for genuine disputes to reject an application. In this case, the dispute raised by the Corporate Debtor was considered unsubstantiated, leading to the admission of the Operational Creditor's application.

6. The Tribunal admitted the application, appointed an Insolvency Resolution Professional (IRP), and directed the Operational Creditor to deposit funds for IRP expenses. Moratorium under Section 14 of IBC was imposed on the Corporate Debtor, and compliance measures were outlined for communication and record-keeping purposes.