2019 (3) TMI 1523 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - claim hit by non-existence of debt - HELD THAT - As to the understanding between the Operational Creditor and the Corporate Debtor, this Corporate Debtor placed Purchase Order for the material and on supply of such material, the Operational Creditor raised invoices against the Corporate Debtor, subsequent thereof, the Corporate Debtor confirmed the claim amount on 20.02.2018, not only that, the corporate debtor made promises that it would soon pay the dues to the operational creditor, indeed the Corporate Debtor made part payment of ₹ 35,37,499. By this, it is evident that the claim of the creditor is established with replete of proof disclosing existence of Operational Debt and default of operational debt. No whisper from the Corporate Debtor regarding alleged non existence of debt until after receipt of Section 8 Notice by the Corporate Debtor. All agreements the Corporate Debtor entered into with group companies and correspondence in respect to other transactions will no way cast any doubt over the existence of debt or default. In view thereof, the material subsequently set out by this Corporate Debtor pales into insignificance as against the proof of existence of debt and default against the Corporate Debtor established by the Operational Creditor. Accordingly, for the reasons aforestated, this Company Petition is hereby admitted by appointing Mrs. Jayashree S Iyer (Reg. No. IBBI/IPA-002/IP-N00741/2018-2019/12211) as the Interim Resolution Professional by declaring moratorium u/s 14 accordingly.

Issues Involved:
1. Existence of debt and default.
2. Relationship between the Operational Creditor and the Corporate Debtor.
3. Validity of the transaction and agreements between the parties.
4. Appointment of the Interim Resolution Professional (IRP).
5. Declaration of moratorium.

Detailed Analysis:

1. Existence of Debt and Default:
The Operational Creditor filed a petition under Section 9 of the Insolvency & Bankruptcy Code, 2016, for initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for defaulting on payment of ?27,49,11,497, which includes the amount of ?24,27,64,004 for the supply of 38,000 MTs of 'A' Grade Barites Lumps and interest of ?3,17,47,493. The Operational Creditor provided evidence of invoices raised and confirmed by the Corporate Debtor, establishing the existence of an operational debt and default.

2. Relationship Between the Operational Creditor and the Corporate Debtor:
The Corporate Debtor attempted to interpose agreements between Sojitz Corporation (SJC) and itself to imply a non-creditor-debtor relationship. However, the Tribunal found that the Operational Creditor, although part of the Sojitz Group, was not a party to those agreements and the transaction in question was independent. The Operational Creditor provided a letter of credit to APMDC for the supply of Barites, and the Corporate Debtor raised purchase orders and confirmed the debt, thus affirming the creditor-debtor relationship.

3. Validity of the Transaction and Agreements Between the Parties:
The Tribunal examined the email correspondence and agreements, concluding that the transaction between the Operational Creditor and the Corporate Debtor was separate from any previous agreements involving SJC. The Corporate Debtor's attempt to link the transaction to earlier agreements was dismissed as irrelevant. The Tribunal emphasized that the transaction was initiated through a specific proposal and correspondence in July 2017, confirming its independence.

4. Appointment of the Interim Resolution Professional (IRP):
The Tribunal rejected the Operational Creditor's suggested IRP from Delhi due to logistical concerns and potential delays. Instead, Mrs. Jayashree S Iyer, a local professional, was appointed as the IRP to ensure efficiency and minimize the burden on the stressed company.

5. Declaration of Moratorium:
The Tribunal declared a moratorium under Section 14 of the Code, prohibiting various actions against the Corporate Debtor, including the institution or continuation of suits, transferring assets, and foreclosing security interests. The moratorium will be effective from 12.02.2019 until the completion of the CIRP, approval of a resolution plan, or liquidation order. The Tribunal also directed the public announcement of the CIRP and immediate communication of the order to relevant parties.

Conclusion:
The Tribunal admitted the petition, confirming the existence of debt and default, and established the creditor-debtor relationship. The transaction was validated as independent and separate from previous agreements. Mrs. Jayashree S Iyer was appointed as the IRP, and a moratorium was declared to facilitate the CIRP. The order was to be communicated immediately to all relevant parties.

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