2018 (10) TMI 1336 - Tri - Insolvency and Bankruptcy

Initiating Corporate Insolvency Resolution Process - outstanding amount due from the Corporate Debtor which has not been paid despite issuance of the demand notice - Held that - Since the respondent failed in proving a pre-existing dispute, the next question is whether the Operational Creditor has succeeded in proving the compliance of Section 9 (5) of the IB code, 2016. To maintain an application of this nature, the Operational creditor has to prove that the Application filed under Section 9 of the IB Code, 2016 is complete, that there is no repayment of the unpaid operational debt, that the invoices of which the claim is made, has been received by the Corporate Debtor, and that there is no disciplinary proceedings pending against the proposed Resolution Professional. Here, in this case, no affidavit under Section 9(3)(b) has been filed because the Corporate Debtor has raised disputes. The dispute raised is found devoid of any merit. In compliance with Section 9(3)(b)(c), the Operational creditor has produced a certificate issued from its Bank dated 27-12-2017 by way of Supplementary Affidavit dated 01-02-2018. However, no name of the Insolvency Resolution Professional is proposed. Therefore, the question of compliance with Section 9(5)(i)(e) does not arise. All other requirements as per Section 9(5)(i)(a) to (c) are seen complied with and since the dispute raised is found not bona fide, this Application is liable to be admitted.

Summary

Issues Involved:
1. Application under Section 9 of the Insolvency & Bankruptcy Code, 2016.
2. Outstanding debt and demand notice.
3. Dispute over the quality of goods supplied.
4. Alleged pre-existing disputes.
5. Compliance with Section 9(5) of the IBC, 2016.
6. Appointment of Interim Resolution Professional (IRP).

Issue-wise Detailed Analysis:

1. Application under Section 9 of the Insolvency & Bankruptcy Code, 2016:
The application was filed by the Operational Creditor, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for an outstanding amount of ?7,06,839/-.

2. Outstanding debt and demand notice:
The Operational Creditor, engaged in the business of dealing in grains and poultry feed ingredients, claimed that despite the issuance of a demand notice, the Corporate Debtor failed to pay the outstanding amount. The debt was acknowledged by the Corporate Debtor through a balance confirmation statement.

3. Dispute over the quality of goods supplied:
The Corporate Debtor contended that the goods supplied were often rotten and unusable, affecting their business. They claimed the goods were supplied randomly by different entities controlled by the Rungta family, causing difficulty in assessing the quality and quantity of goods received.

4. Alleged pre-existing disputes:
The Corporate Debtor argued that there were pre-existing disputes regarding the quality of goods, supported by emails and a test report. However, the Tribunal found these disputes to be hypothetical and not bona fide, as the emails did not specify the invoices in question, and the test report was unrelated to the disputed invoices.

5. Compliance with Section 9(5) of the IBC, 2016:
The Tribunal examined whether the application met the requirements of Section 9(5) of the IBC, 2016. It was found that the application was complete, the demand notice was received, and there were no disciplinary proceedings against the proposed Resolution Professional. The Tribunal concluded that the Operational Creditor complied with the necessary provisions, and the dispute raised by the Corporate Debtor was not genuine.

6. Appointment of Interim Resolution Professional (IRP):
Since the name of the IRP was not proposed by the Operational Creditor, the Tribunal appointed Shri Sanjeev Jhunjhunwala as the Interim Resolution Professional. The IRP was directed to convene a Committee of Creditors and submit a resolution plan within 105 days.

Conclusion:
The Tribunal admitted the application under Section 9 of the IBC, 2016, declared a moratorium, and directed the IRP to carry out the necessary steps for the CIRP. The order emphasized that the disputes raised by the Corporate Debtor were not bona fide and lacked merit, leading to the initiation of the insolvency resolution process.