2022 (7) TMI 362 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - whether debt existed or it was only a security cheque - Forum Shopping - It is submitted that the encashment of the alleged security cheque which in turn gave rise to the alleged dispute was done without the knowledge of the Corporate Debtor - HELD THAT - The Corporate Debtor has not shown any previous transaction when the Corporate Debtor had issued any cheque to the Operational Creditor as a security which had been encashed by the Operational Creditor later, after delivery of the goods. The Corporate Debtor has also not shown any letter or email written by it. Either at the time of issuing that security cheque or immediately when came to it came to know that the gold ornaments have not been delivered, directing the Operational Creditor to return its cheque which is stated to have been issued as a security to the Operational Creditor - It is highly improbable that the Corporate Debtor would issue a cheque of the exact amount of invoice as a security cheque. The invoice is dated 21st May, 2019 and the cheque is dated 20th May, 2019. If as per the Operational Creditor, the new gold ornaments weighting 262.120 Gram as per work order for Rs.8,93,911/- were supplied to the Corporate Debtor on 21st May, 2019 and the Corporate Debtor received the supplies after verification as good without any objection regrading the product quality in the supply of materials. It is not possible that the Corporate Debtor would issue a cheque of exactly the same Invoice amount without receiving the goods or the Invoice. It cannot be believed that it was a security cheque. The dispute has been raised by the Corporate Debtor only after receipt of the Demand Notice. The Operational Creditor has been able to prove its case and the plea raised by the Corporate Debtor is very week defence, which would not nullify the claim of the Operational Creditor. This petition deserves to be admitted and the defence raised by the Corporate Debtor is, therefore, rejected - application admitted - moratorium declared.

Issues Involved:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Alleged non-payment for supplied goods.
3. Dispute regarding the delivery of goods.
4. Legitimacy of the security cheque.
5. Allegations of forgery and fraud.
6. Requirement of a full-fledged trial for adjudication.
7. Moratorium and appointment of Interim Resolution Professional (IRP).

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petition was filed by Venus Creation seeking initiation of CIRP against the Corporate Debtor under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Tribunal convened via video conference to hear the petition.

2. Alleged Non-Payment for Supplied Goods:
The Operational Creditor claimed that the Corporate Debtor placed a work order for gold ornaments worth Rs. 8,93,911/-, which were supplied and received by the Corporate Debtor. The payment made via cheque was dishonored due to insufficient funds.

3. Dispute Regarding the Delivery of Goods:
The Corporate Debtor denied receiving the gold ornaments and claimed that the cheque was issued as a security cheque, not for an actual transaction. The Corporate Debtor alleged that the Operational Creditor did not deliver the goods and was attempting to recover losses through fraudulent means.

4. Legitimacy of the Security Cheque:
The Corporate Debtor argued that the cheque issued was a security cheque, not meant for encashment without the delivery of goods. The Operational Creditor refuted this, stating that the goods were delivered and verified as good by the Corporate Debtor.

5. Allegations of Forgery and Fraud:
The Corporate Debtor accused the Operational Creditor of forgery and fraud, alleging that the Operational Creditor forged the signature and stamp on the invoice. The Tribunal found these claims improbable and unsupported by evidence.

6. Requirement of a Full-Fledged Trial:
The Corporate Debtor contended that the issues required a full-fledged trial with evidentiary proof and cross-examination. However, the Tribunal noted that the dispute raised by the Corporate Debtor was illusory and lacked substance.

7. Moratorium and Appointment of Interim Resolution Professional (IRP):
The Tribunal admitted the application for initiating CIRP and declared a moratorium in accordance with Sections 13 and 15 of the Insolvency and Bankruptcy Code, 2016. Ms. Rachna Jhunjhunwala was appointed as the Interim Resolution Professional (IRP) to manage the CIRP process and convene a Committee of Creditors.

Orders Passed:
1. The application under Section 9 of the Insolvency and Bankruptcy Code, 2016, was admitted.
2. A moratorium was declared, prohibiting suits, asset transfers, and recovery actions against the Corporate Debtor.
3. Ms. Rachna Jhunjhunwala was appointed as the Interim Resolution Professional (IRP).
4. The IRP was directed to convene a meeting of the Committee of Creditors and identify a prospective Resolution Applicant within 105 days.
5. The Operational Creditor was directed to deposit Rs. 1,00,000/- with the IRP for preliminary expenses and fees.
6. The Registry was instructed to communicate the order to all concerned parties and list the matter for a progress report on 22/08/2022.

Conclusion:
The Tribunal found the defenses raised by the Corporate Debtor to be weak and unsupported by evidence, thereby admitting the CIRP application and appointing an IRP to proceed with the insolvency resolution process.

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