2020 (5) TMI 270 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - dishonor of cheexistence of debt and dispute or not - service of notice - HELD THAT - In Alloysmin Industries v. Raman Casting P. Ltd. 2019 (3) TMI 194 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI of the hon ble National Company Law Appellate Tribunal on which the learned counsel for the petitioner placed reliance it was held that if the demand notice under section 8 is served on the corporate debtor either on its registered office or its corporate office it should be treated to be valid service of notice under section 8 and application under section 9 on failure of payment if filed after 10 days is maintainable and hence the contention of the respondent s counsel that the demand notice not served at the registered office of the corporate debtor is unsustainable. Since the respondent-corporate debtor have agreed and admitted its liability to pay the debt and its default by tendering a cheque of Rs. 61, 46, 231 to the petitioner-operational creditor as evidenced by order dated May 24 2019 of this Tribunal which was subsequently dishonoured and since the application is otherwise complete there is no need to consider any other aspect in view of the settled position of law and accordingly this petition is admitted. Petition admitted - moratorium declared.

Issues Involved:
1. Jurisdiction and territorial applicability.
2. Existence of operational debt and default.
3. Validity and service of demand notice.
4. Settlement and subsequent default.
5. Admissibility of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016.
6. Declaration of moratorium and appointment of Interim Resolution Professional (IRP).

Detailed Analysis:

1. Jurisdiction and Territorial Applicability:
The respondent-corporate debtor is a company incorporated under the Companies Act, 1956, with its registered office situated in Union Territory, Chandigarh. Therefore, the matter falls within the territorial jurisdiction of the National Company Law Tribunal (NCLT), Chandigarh Bench.

2. Existence of Operational Debt and Default:
The petitioner-operational creditor, a renowned steel merchant, supplied steel to the respondent-corporate debtor, which was acknowledged through several invoices. The respondent issued cheques towards the outstanding payment, which were dishonored, leading to notices under Section 138 of the Negotiable Instruments Act, 1881. Despite partial payment of Rs. 14,99,941, the principal outstanding amount remained Rs. 61,46,231. The petitioner claimed a total amount of Rs. 1,09,01,774 inclusive of interest.

3. Validity and Service of Demand Notice:
The petitioner sent a demand notice in Form 3, demanding Rs. 1,13,34,241 as on November 10, 2017, under Section 8 of the Insolvency and Bankruptcy Code, 2016. The respondent contended that the demand notice was not served at the registered office. However, the Tribunal, relying on the case Alloysmin Industries v. Raman Casting P. Ltd., held that service of notice at the corporate office is valid.

4. Settlement and Subsequent Default:
The respondent admitted its liability and agreed to settle the debt by paying Rs. 14,99,941 as full and final settlement. However, the petitioner refuted this claim and filed an application for revival and admission of the company petition due to the respondent's failure to honor the settlement cheques. The Tribunal restored the petition after observing the respondent's non-compliance.

5. Admissibility of the Petition under Section 9:
The Tribunal considered the provisions of Section 9(5)(i) of the Code, which mandates the admission of the application if it is complete, there is no payment of the unpaid operational debt, and no notice of dispute has been received. The respondent's admission of liability and default, evidenced by the dishonored cheque of Rs. 61,46,231, satisfied these conditions. The Tribunal also referenced the Supreme Court's judgment in Mobilox Innovations P. Ltd. v. Kirusa Software P. Ltd., emphasizing the need to reject spurious defenses and admit the application if a genuine dispute does not exist.

6. Declaration of Moratorium and Appointment of Interim Resolution Professional (IRP):
The Tribunal declared a moratorium under Section 14 of the Code, prohibiting suits, asset transfers, and recovery actions against the corporate debtor. The supply of essential goods or services to the corporate debtor shall not be terminated during the moratorium period. The Tribunal appointed Ms. Mandeep Gujral as the Interim Resolution Professional (IRP) and directed her to take control of the corporate debtor's assets, make a public announcement, and constitute a committee of creditors.

The Tribunal's order included detailed directions for the IRP to manage the corporate debtor's affairs, ensure cooperation from the debtor's management, and submit regular progress reports to the Tribunal. The petition was admitted, and the moratorium order took effect from the date of the judgment, continuing until the completion of the corporate insolvency resolution process or further orders.

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