2024 (5) TMI 1225 - AT - Insolvency and Bankruptcy

CIRP - NCLT admitted the application u/s 9 - Liability of Corporate Debtor for the outstanding dues claimed by the Operational Creditor - goods being delivered to and demand notices issued to M/s. Chirag Impex (HK) Ltd - validity of the debt and who truly owes the money - malpractices concerning customs duty and under-invoicing. Whether in the facts of this case the Corporate Debtor can be held liable for the outstanding dues claimed by the Operational Creditor, despite the goods being delivered to and demand notices issued to M/s. Chirag Impex (HK) Ltd.? - HELD THAT - Despite repeated reminders and a formal demand notice under Section 8(1) of the Insolvency and Bankruptcy Code, 2016 sent to known email addresses with no delivery failures, the Corporate debtor had failed to respond or dispute the invoices within the legal timeframe. The so called dispute being raised by the Appellant at this stage is based on the remarks of the Adjudicating Authority which are not at all pre-existing dispute - The link between the Corporate Debtor's director's son and Chirag Impex emails further undermines the Corporate Debtor's claims and suggests potential attempts to obfuscate the truth. This linkage cannot be ignored in assessing liability. The Corporate Debtor s claims of a separate company, Chirag Impex, being responsible lack any credible evidence. The Operational creditor's documented trail directly contradicts this assertion. Validity of the debt and who truly owes the money - HELD THAT - The Operational Creditor presents a compelling case with documented evidence signed sales contracts, bills of lading listing them as the shipper and the Corporate Debtor as the receiver, confirmation letters from the Corporate Debtor acknowledging receipt and satisfaction with the machines, and a formal demand notice sent but with no response from the Appellant. The creditor's documented trail, particularly the bills of lading and confirmation letters, appears strong. However, the Corporate Debtor s allegations of Chirag Impex involvement and undervalued invoices tries to raise suspicion but are not convincing at all to treat them as a case of dispute - Despite repeated reminders and a formal demand notice under Section 8(1) of the IBC, the Corporate Debtor failed to respond or dispute the invoices within the legal timeframe, indicating the absence of a pre-existing dispute. Allegations of Malpractices and Customs Duty Evasion - HELD THAT - The alleged malpractices concerning customs duty and under-invoicing, while serious, do not negate the Operational Creditor s claim. These issues are not being addressed by us and need be looked into separately through appropriate investigative channels. - Any issues related to alleged malpractices and customs duty evasion could be investigated separately through the appropriate legal channels and no orders passed onto that issue. The evidence overwhelmingly supports the Operational Creditor s claim for repayment from the Corporate Debtor. The Corporate Debtor has a clear legal obligation to fulfil their financial commitment as outlined in the signed contracts and documented transactions. The Adjudicating Authority s orders to admit the Corporate Debtor into the Corporate Insolvency Resolution Process (CIRP) is upheld. Appeal is dismissed.

Summary

Issues Involved:
1. Validity of the debt and liability of the Corporate Debtor.
2. Existence of a dispute regarding the debt.
3. Allegations of malpractices and customs duty evasion.

Summary:
1. Validity of the Debt and Liability of the Corporate Debtor:
The case involves an appeal u/s 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the admission of Section 9 proceedings by the Adjudicating Authority. The Operational Creditor, Nanjing Maohj Information & Technology Co. Ltd. (NMIT), supplied machineries to M/s Alliance Embroidery Machine Private Limited (Corporate Debtor) through Chirag Impex Limited. The Corporate Debtor did not fully pay for the goods, leading to an outstanding debt of approximately INR 5.59 crores. The Operational Creditor sent a demand notice to both Chirag Impex and the Corporate Debtor, but received no response, prompting the initiation of Section 9 proceedings.

The Corporate Debtor contended that the goods were supplied by Chirag Impex (HK) Ltd., not NMIT, and argued that the two entities are separate legal entities. However, the Adjudicating Authority noted that the Corporate Debtor and Chirag Impex (HK) Ltd. have familial ties and common directors, implying a deeper operational linkage. The Corporate Debtor's signed "Confirmation Letters of Quality and Payment" and Bills of Lading listing NMIT as the shipper and the Corporate Debtor as the recipient of the machines further supported the Operational Creditor's claim.

2. Existence of a Dispute Regarding the Debt:
The Corporate Debtor argued that there was a pre-existing dispute, citing the lack of specific Bills of Entry and alleging that the Operational Creditor routed different machineries through Chirag Impex (HK) Ltd. The Appellant relied on landmark judgments like Mobilox Innovations Pvt. Ltd Vs. Kirusa Software Pvt. Ltd. and S S Engineers Vs Hindustan Petroleum Corporation Ltd. to argue that the debt was disputed and the CIRP petition should be dismissed. However, the Tribunal found that the so-called dispute was not pre-existing and was based on remarks by the Adjudicating Authority regarding customs duty evasion, which did not constitute a genuine dispute under IBC.

3. Allegations of Malpractices and Customs Duty Evasion:
The Corporate Debtor alleged malpractices, including customs duty evasion and under-invoicing, and argued that these issues required investigation rather than admission under IBC. The Adjudicating Authority acknowledged these allegations but noted that they did not negate the Operational Creditor's claim. The Tribunal held that such issues should be investigated separately through appropriate legal channels and did not affect the validity of the debt.

Conclusion:
The Tribunal upheld the Adjudicating Authority's order to admit the Corporate Debtor into the Corporate Insolvency Resolution Process (CIRP) and dismissed the appeal. The evidence overwhelmingly supported the Operational Creditor's claim for repayment, and the Corporate Debtor had a clear legal obligation to fulfill their financial commitments as outlined in the signed contracts and documented transactions. No orders as to costs were passed.