2024 (6) TMI 960 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Operational Creditors - default in payment by the Corporate Debtor (CD) towards the Operational Creditor (OC) - time limitation - HELD THAT - The invoices claimed by the OC dated back 2015 to 2019 while the present Application was filed on 20.02.2021. On perusal of the records, we do not find copy of any invoice produced by the OC in support of its claim of generating them except Annexure-H containing Computation of default prepared by the OC. The OC has also produced Annexure- C, containing particulars of invoices - A demand notice under Section 8 of the IBC has been issued to the CD dated 15.11.2019; however, no reply was received by it in spite of the same having been served on the CD. Since the OC did not produce any invoice on record, it is difficult to ascertain the veracity of its claims and upon perusal of its computation of claims, it is found that all the invoices were raised during the period from 10.05.2015 to 31.12.2017. There is no evidence to suggest whether the alleged debt has been acknowledged by the CD. The bank account statement produced by the OC indicates receipt of Rs. 50,000/- from the CD 15.11.2019 - the law of limitation has come into play since the present Application is filed beyond the limitation period of three years from the date of alleged default as per the invoices. Thus, the issue of limitation is decided against the OC. The OC has not succeeded in proving existence of any operational debt due and payable to it by the CD. Initiation of CIRP is a serious matter and it has severe consequences on a corporate entity. It is not to be allowed in a case which lacks any proof of debt and default committed by the CD - this Application fails as it does not satisfy the necessary requirements for admission under Section 9 of the IBC. This Application u/s 9 of the IBC, filed by Mittal Polymers, the OC, for initiating CIRP in respect of Suvarna Additives Private Limited, the CD is rejected.

Summary

Issues Involved:
The issues involved in this case are the initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) based on unpaid invoices and default in payment by the Corporate Debtor (CD) towards the Operational Creditor (OC).

Contentions of Operational Creditor (OC):
The OC, a Kota-based manufacturer of chemicals, filed a Company Petition under Section 9 of the IBC against the CD for non-payment of dues amounting to Rs. 2,33,10,961. The OC submitted that the CD failed to settle outstanding dues for raw materials supplied between 2015 and 2019, despite receiving invoices and a demand notice. The OC claimed interest on the unpaid amount as per the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).

Contentions of Corporate Debtor (CD):
The CD initially failed to appear and file a reply, leading to the forfeiture of its right to respond. Subsequently, attempts were made to settle the matter, but no agreement was reached. The CD later filed a reply online, seeking to condone the delay, citing unfamiliarity with the online filing system. However, the Tribunal did not consider the late reply and proceeded to evaluate the case based on submissions from both parties.

Analysis and Findings:
Upon reviewing the documents and arguments presented by both parties, the Tribunal found that the OC failed to provide authenticated invoices or sufficient evidence of debt and default by the CD. The lack of concrete proof, such as ledger statements or financial records, led the Tribunal to conclude that the OC did not meet the requirements for initiating CIRP under Section 9 of the IBC. Additionally, the Tribunal noted that the application was filed beyond the limitation period, as the alleged invoices dated back to 2015-2019.

Conclusion:
The Tribunal ruled against the OC, rejecting the application for initiating CIRP against the CD. It emphasized the importance of strict proof of debt and default in such cases, highlighting the serious implications of initiating CIRP without sufficient evidence. The decision did not prejudice the OC's rights to seek legal recourse through other forums. No costs were awarded in this matter.