2020 (10) TMI 10 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - The dispute sought to be raised in the present case is a patently feeble legal argument or an assertion of fact unsupported by evidence. The dispute is also not shown to have truly existed in fact and is spurious, hypothetical or illusory - The contention of Nath Solvent that a dispute truly existed in the present case, is thus rejected. The application under Section 9(2) of the Code is complete. Also, in its account books, Nath Solvent has accepted almost the complete amount claimed to be in default. The dispute sought to be raised by Nath Solvent has been examined in detail above and rejected. No Interim Resolution Professional (IRP) has been proposed by Jai Bhagwan in the application. The requirements of Section 9(5)(i) of the Code are satisfied - application admitted - moratorium declared.

Issues Involved:
1. Jurisdiction of the Tribunal
2. Validity of the debt and interest claimed by the operational creditor
3. Existence of a dispute regarding the debt
4. Compliance with procedural requirements under the Insolvency and Bankruptcy Code (IBC)
5. Appointment of an Interim Resolution Professional (IRP)
6. Declaration of Moratorium

Issue-wise Detailed Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal confirmed its jurisdiction over the case as the registered address of Nath Solvent Extractions Pvt. Ltd. (Nath Solvent) is within its territorial limits, specifically in Village Mohra, Ambala Cantt.

2. Validity of the Debt and Interest Claimed:
Jai Bhagwan, a proprietorship firm, claimed an outstanding amount of ?32,76,147, which included ?24,10,170.96 as the principal amount and interest and sales tax dues. The Tribunal noted that Nath Solvent had acknowledged the debt in its books of accounts for FY 2016-17 and 2017-18, showing balances that matched those claimed by Jai Bhagwan. The Tribunal found that the debt was almost fully acknowledged by Nath Solvent, thus validating the claim.

3. Existence of a Dispute Regarding the Debt:
Nath Solvent argued that Jai Bhagwan had defrauded them by inflating prices and that there was no agreement to pay interest at 18% per annum. However, the Tribunal found that Nath Solvent's claims were unsupported by evidence and deemed them to be a "patently feeble legal argument." The Tribunal referenced the Supreme Court's decision in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd., which states that a dispute must be real and not spurious, hypothetical, or illusory. The Tribunal concluded that no genuine dispute existed.

4. Compliance with Procedural Requirements under the IBC:
The Tribunal confirmed that Jai Bhagwan had complied with all procedural requirements under Section 9 of the Insolvency and Bankruptcy Code (IBC). This included issuing a demand notice, filing an affidavit under Section 9(3)(b), and confirming that no reply or dispute was received from Nath Solvent.

5. Appointment of an Interim Resolution Professional (IRP):
Jai Bhagwan did not propose an IRP in the application. The Tribunal, following the guidelines and panel provided by the National Company Law Tribunal, New Delhi, appointed Mr. Krishan Rajesh Chaudhary as the IRP. The Tribunal verified his credentials and found nothing adverse against him.

6. Declaration of Moratorium:
The Tribunal declared a moratorium under Section 14 of the IBC, which includes:
- Suspension of all suits or proceedings against the corporate debtor.
- Prohibition on transferring or disposing of any assets of the corporate debtor.
- Prohibition on foreclosure or recovery actions against the corporate debtor's property.
- Maintenance of essential goods or services to the corporate debtor.

The moratorium will remain in effect until the completion of the Corporate Insolvency Resolution Process (CIRP) or until a resolution plan is approved or liquidation is ordered.

Conclusion:
The Tribunal admitted the application for initiation of CIRP against Nath Solvent Extractions Pvt. Ltd., declared a moratorium, and appointed Mr. Krishan Rajesh Chaudhary as the Interim Resolution Professional. The Tribunal found that the debt was valid and acknowledged, and that no genuine dispute existed. The procedural requirements under the IBC were satisfied, leading to the initiation of the insolvency process.

← Previous Next →