2020 (6) TMI 395 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Dishonor of cheque - pre-existing dispute or not - time Limitation - HELD THAT - The preliminary issue raised by the Corporate Debtor that filing of Section 138 of the Negotiable Instruments Act, 1881 by the Operational Creditor before the Magistrate Court, Bombay, would amount to preexisting dispute is no longer res integra since the said issue was put to quietus by the Hon'ble NCLAT in the matter of Sudi Sachdev -Vs- APPL Industries Ltd. 2018 (11) TMI 1671 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI , wherein at para 6, it was held that the pendency of the case under Section 138 of the Negotiable Instruments Act, 1881, even if accepted as recovery proceedings, it cannot be held to be a dispute pending before a court of law. It is evident that the claim as raised by the Operational Creditor is within the prescribed period of limitation of 3 years. The registered office of the Corporate Debtoris situated within the State of Tamilnadu, amenable to its territorial jurisdiction and this Authority has no hesitation in admitting this Petition and initiating the Corporate Insolvency Resolution Process (CIRP) as against the Corporate Debtor. Application admitted - moratorium declared.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Existence of Debt and Default
3. Pre-existing Dispute
4. Appointment of Interim Resolution Professional (IRP)
5. Moratorium

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Operational Creditor filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code-2016) seeking to initiate CIRP against the Corporate Debtor. The application was in the prescribed format under Rule 6 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Operational Creditor claimed a total debt of ?61,34,725/- due from the Corporate Debtor.

2. Existence of Debt and Default:
The Operational Creditor, a distributor of IT hardware and software products, supplied goods to the Corporate Debtor, who accepted the goods without any dispute. The Corporate Debtor agreed to pay ?35 Lakhs in partial discharge of the dues, but only paid ?2,00,000/- initially and subsequent smaller amounts. A cheque issued by the Corporate Debtor was dishonored due to "insufficient funds." Despite reminders and a demand notice sent on 25.07.2019, the Corporate Debtor failed to make the remaining payments.

3. Pre-existing Dispute:
The Corporate Debtor argued that there was a pre-existing dispute, claiming that the Operational Creditor failed to provide 9 foreign trip tickets worth ?27 Lakhs as promised under a promotional scheme. The Corporate Debtor issued a notice to the Operational Creditor to either provide the tickets or deduct the amount from the dues. The Operational Creditor did not respond to this notice. The Corporate Debtor also contended that the filing of a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881, indicated a dispute. However, the Tribunal noted that the pendency of a Section 138 case does not constitute a pre-existing dispute as per the precedent set by the Hon'ble NCLAT.

4. Appointment of Interim Resolution Professional (IRP):
The Operational Creditor did not propose an IRP in the application, leaving it to the Tribunal's discretion. The Tribunal appointed Mr. Chandrasekhar Sagutoor as the IRP, subject to no pending disciplinary proceedings and necessary disclosures.

5. Moratorium:
Upon admitting the application, the Tribunal declared a moratorium under Section 14(1) of the I&B Code, 2016. The moratorium prohibits:
a. Institution or continuation of suits or proceedings against the Corporate Debtor.
b. Transfer, encumbrance, or disposal of any assets of the Corporate Debtor.
c. Actions to foreclose, recover, or enforce any security interest.
d. Recovery of property occupied by the Corporate Debtor.
The moratorium remains effective until the completion of the CIRP or until the Tribunal approves a resolution plan or orders liquidation.

Conclusion:
The Tribunal admitted the application for initiating CIRP against the Corporate Debtor, appointed an IRP, and declared a moratorium. The Tribunal found that the Corporate Debtor's defenses were spurious, illusory, and hypothetical, and upheld the Operational Creditor's claim of debt and default. The Tribunal directed the Operational Creditor to pay ?2,00,000/- to the IRP for expenses. The order was communicated to the relevant parties and authorities.

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