2021 (6) TMI 47 - 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 - time limitation - HELD THAT - It is evident that the respondent has not adhered to the terms and conditions of the order and has raised the issue of quality/specifications of the product as a moonshine defence for not paying the operational debt. Had there been any serious issue with regard to specification/quality of the product supplied by the applicant, the respondent could have returned the product immediately on receipt of certificate of analysis dated 09.05.2019 and 18.05.2019. The instant petition filed by the applicant is well within limitation and there is no pre-existing dispute regarding the operational debt from the side of the corporate debtor - from the material placed on record by the Applicant, this Authority is satisfied that the application is complete in all respect and the Corporate Debtor committed default in paying the operational debt due and payable to the Applicant. The documents produced by the operational creditor clearly establish the 'debt' and there is default on the part of the Corporate Debtor in payment of the 'operational debt' - Petition admitted - moratorium declared.

Summary

Issues:
1. Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Dispute regarding the quality/specifications of goods supplied.
3. Adherence to terms and conditions of the purchase order by the respondent.
4. Existence of default in payment of operational debt.
5. Application of legal provisions and precedents in determining the case.

Analysis:
1. The Company Petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, by the Operational Creditor to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for non-payment of dues. The Operational Creditor provided evidence of delivering goods and invoices, establishing the debt due and payable by the Corporate Debtor.

2. The respondent raised objections regarding the quality/specifications of the goods supplied, claiming a pre-existing dispute. However, the Adjudicating Authority found that the respondent's objections were not valid as they did not return the goods immediately upon identifying the alleged discrepancies, indicating a lack of serious issues with the product's quality.

3. The respondent failed to adhere to the terms and conditions of the purchase order, specifically related to quality specifications and payment conditions. The respondent's actions were seen as a defense for non-payment rather than a genuine dispute over the goods supplied, as evidenced by email communications and the respondent's failure to return the goods promptly.

4. The Adjudicating Authority determined that the Operational Creditor had provided sufficient evidence of default and the debt being due and payable. The respondent did not raise any dispute regarding the operational debt, and the application was well within the limitation period, leading to the admission of the petition and declaration of moratorium.

5. Legal provisions and precedents, including the Insolvency and Bankruptcy Code and relevant judgments, were applied to establish the operational debt, occurrence of default, and the necessity to initiate the Insolvency Resolution Process. The Authority appointed an Interim Resolution Professional and issued orders for the moratorium, ensuring the protection of the Corporate Debtor's assets and continuation of essential services during the process.