2018 (7) TMI 634 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - pre existing debt - Held that - The operational creditor has filed supplementary affidavit indexing the certified copy of the bank s statement. The operational creditor has complied with the provision of section 9(3)(b) and (c) of the Insolvency in Bankruptcy code. It is pertinent to mention that proceeding before they Hon ble High Court relating to criminal case filed under section 138 of the Negotiable Instrument Act has been stayed vide order of the Hon ble High Court dated 7 December 2017. Criminal proceedings were relating to criminal liability in connection with dishonouring of cheques. There is nothing on record which proves that there was pre-existing dispute relating to the alleged debt amount. The corporate debtor has itself issued the balance confirmation letter wherein he has accepted the liability of the alleged dues of ₹ 85,53,570 along with interest at the rate of 24% per annum. Given above said facts and principle laid down the contention of the respondent that there was a pre-existing dispute regarding goods given by the Operational Creditor to the Corporate Debtor and that the Pendency of Mediation Proceedings initiated at this instance bar the proceedings under IB Code is found devoid of merit. The Operational Creditor had not received the outstanding dues from the Corporate Debtor, and the requirements as prescribed under IB Code have been completed by the Petitioner. The operational creditor has not proposed the name of any insolvency professional, but under section 9 of the insolvency in the bankruptcy code, it is not mandatory to propose the name of insolvency professional - this Petition deserves Admission. Hence Admitted.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Existence of debt and default by the Corporate Debtor.
3. Dispute regarding debit/credit notes and their validity.
4. Compliance with procedural requirements under the Insolvency and Bankruptcy Code.
5. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The petition was filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of CIRP against the Corporate Debtor. The application was supported by invoices, goods receipts, and a ledger account showing the outstanding debt.

2. Existence of debt and default by the Corporate Debtor:
The Operational Creditor claimed an outstanding debt of ?85,53,570 as on 10-02-2017. The Corporate Debtor issued cheques which were dishonored, leading to a complaint under Section 138 of the Negotiable Instruments Act. The Corporate Debtor acknowledged the debt in their ledger account but disputed certain debit/credit notes.

3. Dispute regarding debit/credit notes and their validity:
The Corporate Debtor claimed that there were mutually agreed debit/credit notes reducing the outstanding amount. However, the Operational Creditor denied the validity of these notes, alleging that the signatures were forged. A forensic report supported the Operational Creditor's claim, and the Tribunal noted that the Corporate Debtor failed to produce original debit notes, indicating possible manipulation.

4. Compliance with procedural requirements under the Insolvency and Bankruptcy Code:
The Tribunal observed that the Corporate Debtor failed to raise a dispute within ten days of receiving the demand notice, as required under Section 8(2)(a) of the Code. The Tribunal also noted that the Operational Creditor complied with the provisions of Section 9(3)(b) and (c) of the Code by filing a supplementary affidavit with the bank's statement.

5. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium:
The Tribunal admitted the petition and declared a moratorium under Section 14 of the Code, prohibiting certain actions against the Corporate Debtor. Mr. Pramod Kumar Sharma was appointed as the Interim Resolution Professional (IRP) to carry out the CIRP.

Conclusion:
The Tribunal found that the Operational Creditor had established the existence of debt and default by the Corporate Debtor. The alleged dispute raised by the Corporate Debtor was deemed a "patently feeble legal argument" unsupported by valid evidence. Consequently, the petition was admitted, and a moratorium was declared, with the appointment of an IRP to initiate the CIRP process.