2022 (5) TMI 873 - 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 - It would be clear from the record that the Corporate Debtor did not respond to Section 8 Notice served on it, which was an opportunity provided to the Corporate Debtor to place its defence by informing the Operational Creditor about any payments as and when made, out of the outstanding operational debt being claimed by the Operational Creditor - The amount claimed is outstanding on account of the supplies made, and payable by the Corporate Debtor to the Operational Creditor. Section 8 Notice has been duly delivered but not responded to by the Corporate Debtor. The pleas taken by the Corporate Debtor as regards preexisting disputes are not convincing, and are therefore rejected. The application filed by the Operational Creditor under Section 9 of the Insolvency Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, is hereby admitted - moratorium declared.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Allegations of pre-existing disputes regarding the quality of goods supplied.
3. Compliance with mandatory provisions of Section 9 of the IBC.
4. Admission of the petition and declaration of moratorium.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Operational Creditor, engaged in the business of acquiring and selling waste paper, sought the initiation of CIRP against the Corporate Debtor, Balaji Paper & Newsprint Private Limited, for non-payment of outstanding dues amounting to Rs. 9,61,35,795/-. The Operational Creditor supplied waste paper to the Corporate Debtor from June 2018 to March 2019 but did not receive any payment despite repeated requests. A Demand Notice was issued on 17th June 2019, which was duly received by the Corporate Debtor on 19th June 2019. The Corporate Debtor failed to respond to the notice or indicate any pre-existing disputes.

2. Allegations of Pre-existing Disputes:
The Corporate Debtor argued that the application was filed with fraudulent and malicious intent, highlighting several pre-existing disputes regarding the quality of goods supplied. They claimed that since 2015, the quality of goods supplied had deteriorated, leading to losses and damages. Various letters from 2015 to 2016 were cited to support their claim of inferior quality goods and unresolved disputes. However, the Operational Creditor denied these allegations, asserting that no such disputes were raised during the relevant period (2018-2019) and that the Corporate Debtor had accepted and utilized the goods without protest.

3. Compliance with Mandatory Provisions of Section 9 of the IBC:
The Corporate Debtor contended that the application did not comply with the mandatory provisions of Section 9 of the IBC, including the law of limitation. The Operational Creditor countered this by stating that all necessary documents, such as tax invoices, challans, raw material quality analysis reports, and demand notices, were duly submitted and that the Corporate Debtor's claims of pre-existing disputes were fabricated and an afterthought.

4. Admission of the Petition and Declaration of Moratorium:
After considering the pleadings and documents, the Tribunal found that the Corporate Debtor did not respond to the Section 8 Notice, which was an opportunity to present any pre-existing disputes or payments made. The Tribunal was not convinced by the Corporate Debtor's claims of pre-existing disputes, finding the documents submitted by the Corporate Debtor to be false and manufactured. Consequently, the Tribunal admitted the petition under Section 9 of the IBC and declared a moratorium in accordance with Sections 13 and 15 of the IBC.

Orders:
1. The application for initiating CIRP against the Corporate Debtor was admitted.
2. A moratorium was declared as per Section 14 of the IBC, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovery of property by owners or lessors.
3. The supply of essential goods or services to the Corporate Debtor was not to be terminated during the moratorium period.
4. Mr. Bijay Murmuria was appointed as the Interim Resolution Professional (IRP).
5. The Operational Creditor was directed to deposit Rs. 5,00,000/- with the IRP for preliminary expenses and fees.
6. The IRP was to convene a meeting of the Committee of Creditors and submit a resolution plan within 105 days.
7. The Registry was directed to communicate the order to all concerned parties and list the matter on 30/06/2022 for filing of the Progress Report.
8. IA (IBC)/1671/KB/2019 was dismissed.

The Tribunal's decision emphasized the lack of credible evidence from the Corporate Debtor regarding pre-existing disputes and upheld the Operational Creditor's claim, leading to the initiation of the CIRP process.

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