2022 (3) TMI 197 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - pre-existence of dispute in respect of proceedings under section 138 of Negotiable Instruments Act, 1889 - time limitation - HELD THAT - Both the parties were maintaining a running account in lieu of which invoices were being raised and part payment had been made and as the petition has been filed on 07.11.2019, hence it is well within the limitation period. The Corporate Debtor in the present case contended that the goods supplied by the Operational Creditor were through various third-party manufacturers therefore, the Operational Creditor does not have right to payment or a right to remedy for breach of contract and the operational creditor does not have right to payment against the invoices in which he does not have authority to claim payment from Corporate Debtor on behalf of third parties. However, the Operational creditor in the present application annexed the 'Payment Authority Letters' duly authorizing Operational Creditor to receive payment on behalf of third-party manufacturers from Corporate Debtor. It is pertinent to mention that the corporate debtor in its reply submitted that he reconciled his account after being issued notice of dispute, however no such documentary proof regarding any dispute regarding accounts reconciliation or with regard to material supplied has been annexed with the reply affidavit - It is further pertinent to mention that the corporate debtor in its reply to the Section 8 demand notice has stated that during the course of hearing of complaint filed by operational creditor under section 138 of N.I. Act, the corporate debtor offered an amount of ₹ 30,00,000/- towards final settlement. This Adjudicating Authority is of the view that there is an operational debt which is due from the corporate debtor and the corporate debtor has defaulted in making payment of the amount due and along with that, in the absence of any preexistence of dispute, this tribunal admits this application and initiates CIRP on the Corporate Debtor with immediate effect - Application admitted - moratorium declared.

Issues Involved:
1. Application for initiation of Corporate Insolvency Resolution Process (CIRP)
2. Alleged default by Corporate Debtor
3. Limitation period for claims
4. Right to payment and breach of contract
5. Pre-existence of dispute
6. Appointment of Interim Resolution Professional (IRP)
7. Declaration of moratorium

Detailed Analysis:

1. Application for initiation of Corporate Insolvency Resolution Process (CIRP):
The application was filed by the Operational Creditor, seeking to initiate CIRP under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor for an alleged default in clearing a debt of ?81,93,330/- for goods provided. The Operational Creditor claimed that the Corporate Debtor had given purchase orders for Kraft Paper Reels, which were supplied through various manufacturers as per the Corporate Debtor's instructions.

2. Alleged default by Corporate Debtor:
The Operational Creditor asserted that the Corporate Debtor had not paid for the supplied Kraft Paper Reels, resulting in an outstanding amount. The Corporate Debtor, however, contended that payments were made for the purchase orders and that the Operational Creditor's claim included invoices that were either time-barred or already paid.

3. Limitation period for claims:
The Corporate Debtor argued that the application was barred by limitation as the invoices were prior to January 2015. The Tribunal found that the parties had a continuous running account and business relationship, with the last sale invoice dated 15.09.2017 and the last payment made on 23.01.2018. The application filed on 07.11.2019 was thus within the limitation period.

4. Right to payment and breach of contract:
The Corporate Debtor claimed that the Operational Creditor did not have the right to payment or remedy for breach of contract as the goods were supplied through third-party manufacturers. However, the Operational Creditor provided 'Payment Authority Letters' authorizing it to receive payments on behalf of these manufacturers, establishing its right to claim payment.

5. Pre-existence of dispute:
The Corporate Debtor raised the issue of pre-existing disputes, including proceedings under Section 138 of the Negotiable Instruments Act. However, the Tribunal noted that no documentary proof of any dispute regarding account reconciliation or material supplied was submitted by the Corporate Debtor. The Corporate Debtor's offer of ?30,00,000/- for settlement during the hearing of the Section 138 complaint further indicated the absence of a genuine dispute.

6. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Aishwarya Mohan Gahrana as the IRP, directing him to take necessary steps under Sections 15, 17, and 18 of the Code and file his report within 30 days. The Applicant was instructed to deposit ?2 lakhs for the IRP's immediate expenses, to be reimbursed as CIRP costs.

7. Declaration of moratorium:
A moratorium was declared under Section 14 of the Code, prohibiting:
- Institution or continuation of suits or proceedings against the Corporate Debtor.
- Transferring, encumbering, or disposing of the Corporate Debtor's assets.
- Actions to foreclose or enforce security interests.
- Recovery of property by owners or lessors.

The Tribunal clarified that licenses, permits, registrations, and similar grants would not be suspended or terminated due to insolvency, provided there was no default in current dues. The moratorium would not apply to transactions notified by the Central Government or the supply of essential goods or services.

Conclusion:
The Tribunal admitted the application for initiating CIRP against the Corporate Debtor, appointed an IRP, declared a moratorium, and directed necessary actions to be taken as per the Insolvency and Bankruptcy Code, 2016.

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