2020 (2) TMI 1488 - 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 - This Bench has observed that the Corporate Debtor has not made any specific averments in its Notice of Dispute dated 05.11.2018 as regards to payment of the debt owed to the Operational Creditor to the other concerns namely M/s. Olympus Metal Private Limited M/s. Simla Holdings and M/s. Oyster Steels and Iron Pvt. Ltd. Further on comparison of the Ledger of Operational Creditor and Corporate Debtor with the Bank Statements it is apparent on the face of the record that the Corporate Debtor has made payments of Rs. 1, 95, 34, 823 on 21.10.2017 and Rs. 1, 95, 79, 294 on 10.11.2017 to the Operational Creditor by RTGS Bank transfer - the Corporate Debtor failed to produce any tri-parte agreement amongst the Operational Creditor Corporate Debtor and its sister concerns authorising the Corporate Debtor to make payments to other concerns. Moreover the Debtors are Assets of the Company which cannot be extinguished or transferred to another concern in the absence of any specific agreement or specific Board resolution to that effect in favour of the Corporate Debtor. This Bench is of the opinion that the dispute raised by the Corporate Debtor is illusionary and moonshine which is upstretched with an intention to erase its liability and defeat the claim made by the Operational Creditor - the present Petition being complete and having established the default in payment of the Operational Debt beyond doubt the Operational Creditor is entitled to claim its dues. The amount of default being above Rs. 1, 00, 000 for the unpaid invoice the Petition is admitted in terms of Section 9(5) of the IBC and accordingly moratorium is declared in terms of Section 14 of the Code. Application admitted.

Summary

Issues Involved:
1. Existence of Operational Debt and Default
2. Pre-existing Dispute
3. Payments and Ledger Discrepancies
4. Authorization of Payments to Third Parties
5. Admission of Petition and Moratorium

Issue-wise Detailed Analysis:

1. Existence of Operational Debt and Default:
The petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) by M/s. Worldwide Metals Pvt. Ltd. (Operational Creditor) against M/s. J.P. Engineers Pvt. Ltd. (Corporate Debtor) to initiate the Corporate Insolvency Resolution Process (CIRP). The Operational Creditor claimed that the Corporate Debtor had a running account for the purchase of Aluminum Ingots and Wire Rods, with outstanding invoices amounting to Rs. 16,18,18,265. A Demand Notice was sent on 27.10.2018, to which the Corporate Debtor responded on 05.11.2018.

2. Pre-existing Dispute:
The Corporate Debtor contended that the supplies were made based on oral instructions without written purchase orders and that there were discrepancies in the ledger accounts. The Corporate Debtor claimed that payments were made to third parties on behalf of the Operational Creditor, which nullified the liability. The Tribunal observed that the Corporate Debtor did not make specific averments regarding these payments in its Notice of Dispute dated 05.11.2018.

3. Payments and Ledger Discrepancies:
The Corporate Debtor argued that the ledger entries provided by the Operational Creditor were incorrect and that payments were made to entities such as Oyster and Iron Private Limited, Simla Holdings, and Olympus Metal Private Limited. The Operational Creditor refuted these claims, stating that the letters annexed by the Corporate Debtor were forged and fabricated. The Tribunal compared the ledgers and bank statements, confirming that payments of Rs. 1,95,34,823 and Rs. 1,95,79,294 were made to the Operational Creditor via RTGS.

4. Authorization of Payments to Third Parties:
The Corporate Debtor failed to produce any tri-partite agreement authorizing it to make payments to third parties on behalf of the Operational Creditor. The Tribunal emphasized that the assets of the company cannot be transferred without specific agreements or board resolutions. The Tribunal referenced a judgment stating that companies transact business through board resolutions, rejecting any oral agreements as moonshine.

5. Admission of Petition and Moratorium:
The Tribunal concluded that the dispute raised by the Corporate Debtor was illusionary and intended to defeat the claim of the Operational Creditor. The petition was deemed complete, and the default in payment was established beyond doubt. The Tribunal admitted the petition under Section 9(5) of the IBC and declared a moratorium under Section 14 of the Code, imposing prohibitions on suits, asset transfers, security interest enforcement, and property recovery. Mr. Sumit Bansal was appointed as the Interim Resolution Professional (IRP), and the Operational Creditor was directed to deposit Rs. 2,00,000 with the IRP for immediate expenses.

In conclusion, the Tribunal found in favor of the Operational Creditor, initiating the CIRP against the Corporate Debtor and imposing a moratorium as per the provisions of the IBC, 2016.