2021 (5) TMI 544 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditors - existence of debt and dispute or not - HELD THAT - It is seen that there was business dealing between both the parties. The nature of goods being perishable commodity, slightest delay shall cause huge loss. Further, there were lots of discussions and reconcilement of the accounts between both the parties, as evident from the exchange of mails. There is also counter claim raised by the respondent, and the same is evident by auditor statement for the relevant years. The 'debt' as claimed by Operational Creditor is towards carton boxes and other packing material supplied by Operational Creditor along with purchase orders of the year 2016-2017. The packing materials are also perishable. Further, the onus of, who has to take back the unused materials, whether the same is adjusted towards payment are not clear. The applicant has failed to quantify the alleged 'debt' and the 'date of default'. Neither debt nor default is proved - Petition dismissed.

Summary

Issues:
- Application under section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.
- Dispute regarding payment of operational debt between Operational Creditor and Corporate Debtor.
- Claims and counterclaims related to the supply of perishable goods and payment delays.
- Lack of quantification of debt and default by the Operational Creditor.

Analysis:
The judgment involves an application filed under section 9 of the Insolvency and Bankruptcy Code, 2016 for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to default in payment of operational debt. The Operational Creditor alleged that the Corporate Debtor defaulted in payment of &8377; 18,73,732.83 for the supply of Mango pulp. The Operational Creditor claimed to have made payments as per a full and final settlement, but the Corporate Debtor allegedly quoted excessive rates for cans with pulp, leading to a demand for return of the equivalent amount. Despite a demand notice and no response from the Corporate Debtor, the outstanding debt remained uncleared.

The Corporate Debtor contended that the Operational Creditor failed to procure goods as per the terms, resulting in stored perishable goods. They claimed negotiations for a proper price due to the goods' perishable nature and alleged that the Operational Creditor demanded the return of cans/cartons instead of paying for the goods received. The Corporate Debtor highlighted outstanding invoices and financial strain due to delayed payments by the Operational Creditor, denying claims of supplying old materials causing payment delays.

Upon examining the submissions and documents, the Adjudicating Authority noted the perishable nature of the goods involved, emphasizing the potential for significant losses due to delays. The Authority observed reconciliations and discussions between the parties but found a lack of clarity on the handling of unused materials and adjustments towards payment. The respondent raised a counterclaim of &8377; 9,82,710, which the Operational Creditor failed to address satisfactorily in the rejoinder. Consequently, the Authority dismissed the Company Petition CP/862/2018 due to the Operational Creditor's failure to quantify the alleged debt and establish the date of default conclusively. The judgment highlights the importance of clear documentation and quantification of claims in insolvency proceedings to establish liability effectively.