2022 (1) TMI 397 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - dishonour of the cheques, which were issued for repayment of dues - recovery of damages - HELD THAT - Taking into consideration of the fact that the cheques which were given as part of the memorandum of understanding were also not honoured by the corporate debtor, the contention of the corporate debtor does not hold any water that the memorandum of understanding was taken under coercion. Further, the cheques were given as a security is also not convincing. It clearly demonstrates that there exists a debt which was substantiated by the memorandum of understanding as well as the cheques issued as per the memorandum of understanding for repayment of the debt. The default of debt was also amply proved by the operational creditor. In addition, the operational creditor has also mentioned in his form 3 demand notice that he has filed the details of debt with the information utility as provided under the IBC. However, the same was not refuted by the corporate debtor which clearly demonstrates that the corporate debtor has not denied the details of debt filed by the operational creditor within the information utility which also further weakens the case of the corporate debtor. The operational creditor has a strong case and the corporate debtor has to be admitted to CIRP as prayed for by the operational creditor. Accordingly, the instant application filed under section 9 of the I and B Code, 2016 is hereby admitted - Application admitted - moratorium declared.

Issues Involved:
1. Default in payment of ?1,77,15,636 along with interest by the corporate debtor.
2. Requirement of statutory demand notice under Section 8 of the IBC.
3. Dispute regarding the quality of goods supplied.
4. Allegation of misuse of blank cheques.
5. Pre-existing disputes and pending civil suits.
6. Appointment of Interim Resolution Professional (IRP).
7. Declaration of moratorium and related directions.

Issue-wise Detailed Analysis:

1. Default in Payment:
The petitioner, M/s. Binjusaria Ispat P. Ltd., alleged that M/s. Abhirama Steels Ltd. defaulted on a payment of ?1,77,15,636 along with 18% interest from April 4, 2016, to March 4, 2019. The operational creditor supplied Mild Steel Billets to the corporate debtor, who failed to pay despite repeated demands and a memorandum of understanding (MoU) dated February 13, 2016, acknowledging the debt and issuing cheques which were dishonored.

2. Statutory Demand Notice:
The corporate debtor argued that the petition is not maintainable as the operational creditor failed to send a statutory demand notice under Section 8 of the IBC. The operational creditor contended that a notice was issued on April 13, 2016, under Section 434 of the Companies Act, acknowledged by the corporate debtor, thus fulfilling the requirement.

3. Quality of Goods Supplied:
The corporate debtor claimed the supplied materials were defective and informed the operational creditor, who failed to rectify the issue. The operational creditor denied these claims, stating no dispute regarding the quality was raised before the demand notice, terming the dispute as a "moon shine" to escape liability.

4. Allegation of Misuse of Blank Cheques:
The corporate debtor alleged that blank cheques given as security were misused by the operational creditor. The operational creditor countered this by stating that the cheques were part of the MoU and were dishonored due to insufficient funds, indicating a clear default.

5. Pre-existing Disputes and Pending Civil Suits:
The corporate debtor cited a pending civil suit (O.S. No. 487 of 2016) for damages due to defective material, claiming it as a pre-existing dispute. The operational creditor noted the suit was dismissed for default and termed the dispute as spurious. The Tribunal found the dispute to be not genuine and aimed at avoiding payment.

6. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Maruti Venkata Subba Rao Poluri as the IRP, as recommended by the Insolvency and Bankruptcy Board of India (IBBI), to oversee the Corporate Insolvency Resolution Process (CIRP).

7. Declaration of Moratorium and Related Directions:
The Tribunal admitted the petition under Section 9 of the IBC, 2016, and declared a moratorium with the following directions:
- Prohibition of suits or continuation of pending suits against the corporate debtor.
- Prevention of transferring or disposing of assets by the corporate debtor.
- Continuation of essential goods or services supply to the corporate debtor.
- The moratorium will last until the completion of the CIRP or until a resolution plan is approved or liquidation is ordered.
- The petitioner was directed to deposit ?2,00,000 with the IRP for expenses and fees.
- Immediate public announcement of the CIRP.
- The registry to update the corporate debtor's status on the MCA-21 site.

Conclusion:
The Tribunal found in favor of the operational creditor, admitting the petition and initiating the CIRP against the corporate debtor, appointing an IRP, and declaring a moratorium with specific directions to ensure compliance with the IBC, 2016.

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