2022 (10) TMI 584 - 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 applicant in Part-IV of Form 5 of the petition had claimed outstanding debt amounting Rs. 4,77,73,937/- including outstanding principal amounting Rs. 2,21,38,643/- and interest amounting Rs. 2,56,35,294/-. From the averments of the applicant, no doubt that the applicant had issued demand notice ('first demand notice') dated 09.10.2020 for the outstanding operational debt amounting Rs. 5,60,46,493/- including Rs. 4,22,75,591/- as outstanding principal amount and outstanding interest amounting Rs. 1,37,70,902/- as on 16.03.2020, which was subsequently withdrawn by the applicant in view of the admission of the liability by the corporate debtor and part payment of Rs. 2,00,00,000/- by way of RTGS and further issuing 11 post-dated cheques for an aggregate amount of Rs. 2,16,00,465/- which were later dishonored at the time of presenting the cheques for encashment precisely during the period 09.04.2021 to 30.09.2021 - what is to be observed is the documents relied by the applicant on the basis of which the demand notice and the instant petition is filed. As evident the applicant in pt.7 of the second demand notice dated 25.11.2021 and Part-V of the instant petition had majorly relied on the copy of the pending invoices, account statements to prove the existence of debt. Further, neither the applicant nor the corporate debtor had placed on record any document or correspondence as to show that any settlement was arrived at between the parties and the second demand notice dated 25.11.2021 was issued subsequent to the breach of any settlement terms. The corporate debtor had failed to raise any plausible contention as to the existence of disputes prior to issuance of demand notice dated 25.11.2021 and the pre-existing dispute attempted to be raised by the corporate debtor is a feeble one, unsupported by any evidence, is a moonshine and nothing else. The operational debt is above the pecuniary threshold limit of Rs. 1 crore as envisaged under Section 4 of the Code, 2016 which was due and there was default on the part of the corporate debtor in pursuance of invoices raised on behalf of the applicant. Further, keeping in view all the reasons, this Adjudicating Authority is satisfied that there is an existence of 'debt' and 'default' as defined under the Code, 2016. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Existence of Operational Debt
3. Pre-existing Dispute
4. Unilateral Imposition of Interest
5. Moratorium and Appointment of Interim Resolution Professional (IRP)

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petition was filed by the 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, to initiate CIRP against the Corporate Debtor. The Tribunal found that the operational debt exceeded the pecuniary threshold limit of Rs. 1 crore as envisaged under Section 4 of the Code, 2016, and there was a default on the part of the Corporate Debtor in pursuance of invoices raised by the applicant. Consequently, the petition was admitted, and CIRP was ordered to be initiated against the Corporate Debtor.

2. Existence of Operational Debt:
The applicant claimed an outstanding debt amounting to Rs. 4,77,73,937/-, including the principal amount of Rs. 2,21,38,643/- and interest of Rs. 2,56,35,294/-. The Tribunal observed that the applicant had issued two demand notices, the first on 09.10.2020 and the second on 25.11.2021. The first demand notice was withdrawn after part payment by the Corporate Debtor and issuance of post-dated cheques, which were later dishonored. The Tribunal emphasized that the second demand notice was based on pending invoices and account statements, not on breach of settlement terms, and thus constituted an operational debt.

3. Pre-existing Dispute:
The Corporate Debtor contended that there was a pre-existing dispute regarding the arbitrary and exorbitant charges levied by the applicant. However, the Tribunal noted that the Corporate Debtor continued placing orders and receiving goods even after discovering the alleged exorbitant charges in June 2020. Additionally, the Corporate Debtor failed to provide any correspondence or documents showing a dispute before the issuance of the second demand notice. The Tribunal concluded that the contention of a pre-existing dispute was unsupported by evidence and was overruled.

4. Unilateral Imposition of Interest:
The Corporate Debtor argued against the unilateral imposition of interest at 24% per annum. The Tribunal found that the invoices explicitly contained a provision for charging interest at 24% per annum if payments were not made within the stipulated time. Citing relevant judgments, the Tribunal held that the total amount for the maintainability of the claim includes both the principal debt and interest on delayed payments as stipulated in the invoices. Thus, the applicant's claim for interest was valid and the Corporate Debtor's contention was rebutted.

5. Moratorium and Appointment of Interim Resolution Professional (IRP):
The Tribunal declared a moratorium in terms of Section 14 of the Code, imposing prohibitions on suits, transferring assets, and other specified actions against the Corporate Debtor. Mr. Pradeep Kumar was appointed as the IRP, subject to no pending disciplinary proceedings against him. The applicant was directed to deposit Rs. 2 lacs with the IRP to meet the expenses of performing assigned functions. The IRP was tasked with protecting and preserving the value of the Corporate Debtor's property and managing its affairs in accordance with the Code, Rules, and Regulations.

The Tribunal's order also included directions for compliance and communication with relevant authorities, including the IBBI and ROC, to ensure proper execution and documentation of the proceedings.