2017 (10) TMI 296 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - application under Section 9 of the Insolvency & Bankruptcy Code, 2016 - Whether any dispute has been raised by the Respondent/Corporate Debtor within the meaning of sub-section (6) of Section 5 or sub-section (2) of Section 8 of the IB Code - sufficient compliance of Section 9(c) of the IB Code - Held that - A part of the argument of the learned Counsel for the Applicant that is in respect of agreeing for reconciliation is correct. But, as can be seen from the Reply Notices dated 17.11.2016 and 3.1.2017 that were placed on record that due to the dispute amongst the Directors there was an understanding among family members of the Respondent Company and the Applicant family people to pay 50 per cent of the amounts and rest of the amount in 20 equal monthly instalments. In view of the said statement in the Reply Notices, it cannot be said that there is any dispute regarding the existence of amount of debt. It only suggests that there is an understanding between the family of the Applicant and the family of the Respondent to pay 50% at once and pay rest of the amount in instalments. Such understanding cannot be treated as a dispute regarding the existence of the amount of debt. More so, it confirms the existence of debt. The dispute raised in reply notice dated 17.11.2016 is only in respect of the authority of the person has signed the cheques but not to the existence of debt. This Adjudicating Authority directed the Applicant to comply with Section 9(c). The Applicant filed Additional Affidavit along with Certificate of the Banker. In the Affidavit, it is stated by the Deponent that he is enclosing a copy of the Certificate from the Financial Institution maintaining the account of the Operational Creditor confirming that there is no payment of unpaid operational debt by Corporate Debtor. The Certificate reads as to what are the cheques received from Durolam Limited for clearing. The Applicant party also filed Statement of Account from the Bank and therefore there is sufficient compliance of Section 9(c) of the IB Code. The Application is complete in all respects. There is no dispute raised by the Respondent regarding the existence of the amount of debt, or quality of goods supplied. In view of the above said findings, the Application deserves admission and accordingly the Application is admitted under sub-section (5) of Section 9 of the Code. This Adjudicating Authority hereby appoint Shri Nimai Shah, as Interim Insolvency Resolution Professional having office at 605-606-607, Silver Oaks, Near Mahalaxmi Char Rasta, Paldi, Ahmedabad-380007 and having Registration No. IBBI/IPA-001/IP-POO 154/2017-18/10323 under Section 13(1)(c) of the Code. The Interim Insolvency Resolution Professional is hereby directed to cause public announcement of the initiation of Corporate Insolvency Resolution Process and call for submission of claims under Section 13(l)(b) read with Section 15 of the Code and Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Summary

Issues Involved:
1. Whether any dispute has been raised by the Respondent/Corporate Debtor within the meaning of sub-section (6) of Section 5 or sub-section (2) of Section 8 of the IB Code, and if so, whether it is a bona fide dispute on substantial grounds.
2. Whether there is sufficient compliance of Section 9(c) of the IB Code.

Issue-wise Detailed Analysis:

Issue 1: Dispute Raised by the Respondent/Corporate Debtor

The Applicant, Bhagwati Corporation, issued several notices to the Respondent, Shrinidhi Laminates Limited, regarding dishonoured cheques and outstanding debts. The Respondent raised disputes in reply notices. The primary contention was that the cheques were issued by Rajkumar Agrawal, who was no longer a director from 1st May 2016, and thus not an authorised signatory. The Respondent also alleged collusion between the Applicant and Rajkumar Agrawal to create false documents, citing offences under Sections 406, 420, 465, 467, and 471 IPC.

The National Company Law Appellate Tribunal's precedent in Kirusa Software (P.) Ltd. v. Mobilox Innovations Private Ltd. was referenced, which states that disputes under the IB Code must relate to the existence of debt, quality of goods or services, or breach of representation or warranty. The Tribunal found that the disputes raised by the Respondent pertained to the authority of the cheque signatory rather than the existence of the debt itself. The Respondent's suggestion for reconciliation and partial payments further confirmed the existence of the debt, indicating no substantial dispute regarding the debt's existence.

Issue 2: Compliance with Section 9(c) of the IB Code

The Tribunal directed the Applicant to comply with Section 9(c) by providing a certificate from the financial institution maintaining the account of the Operational Creditor. The Applicant filed an additional affidavit and the required certificate, confirming no payment of the unpaid operational debt by the Corporate Debtor. The certificate detailed the cheques received from Durolam Limited for clearing, and the Applicant also submitted a statement of account from the bank. The Tribunal found that there was sufficient compliance with Section 9(c).

Conclusion:

The Tribunal concluded that the application was complete in all respects, with no substantial dispute regarding the existence of the debt or the quality of goods supplied. The application was admitted under sub-section (5) of Section 9 of the IB Code. Shri Nimai Shah was appointed as the Interim Insolvency Resolution Professional, and a moratorium was ordered under Section 13(1)(a) of the IB Code, prohibiting various actions against the corporate debtor.

Moratorium Details:
- Prohibition of institution or continuation of suits or proceedings against the corporate debtor.
- Prohibition of transferring, encumbering, alienating, or disposing of the corporate debtor's assets.
- Prohibition of actions to foreclose, recover, or enforce any security interest.
- Prohibition of recovery of property by an owner or lessor.

The moratorium came into force from the date of the order until the completion of the Corporate Insolvency Resolution Process, subject to certain conditions. The application was disposed of with no order as to costs.