2020 (9) TMI 261 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - outstanding operational debt - default of debt or not - respondent/corporate debtor filed affidavit in reply inter alia stating that the petition is contrary to the object of the I B Code the corporate debtor is not an insolvent company and is merely facing a temporary financial crunch. HELD THAT - The demand notice issued by the applicant on 14th December 2019 has been replied by the corporate debtor vide letter dated 18th December 2019 (page 39 of the application) wherein the corporate debtor has categorically admitted the operational debt and has requested the operational creditor to give more time to settle the outstanding amount. Moreover the corporate debtor has also confirmed the dues payable to the applicant in confirmation of accounts from 1st April 2019 to 30th September 2019 annexed to the application (page 22) which bears the seal and signature of the respondent. Under such circumstances contentions raised by the respondent that there is nothing on record to show that the goods in respect of the invoices mentioned in the petition were actually delivered on the desired time and claiming that the goods were not delivered to the respondent etc. are illusory and far from truth. The instant petition filed by the applicant is well within limitation and there is no denial of the operational debt and/or any pre-existing dispute regarding the operational debt from the corporate debtor - from the material placed on record by the Applicant this Authority is satisfied that the application is complete in all respect and the Corporate Debtor committed default in paying the operational debt to the Applicant. On perusal of the records it is also found that the corporate debtor has never raised any dispute on issuance of notice u/s 8 of the I B Code nor have ever raised any dispute prior to the issuance of notice - it is evident that the respondent has defaulted the debt and has admitted the operational debt. On the basis of material available on record it is evident that the corporate debtor has committed default in payment of operational debt and therefore it is a fit case to initiate Insolvency Resolution Process by admitting the Application under Section 9(5)(1) of the Code - Petition admitted - moratorium declared.

Summary

Issues:
Application under Section 9 of The Insolvency and Bankruptcy Code, 2016 for operational debt.

Analysis:
The application was filed by a director of a company under Section 9 of The Insolvency and Bankruptcy Code, 2016, as an operational creditor. The respondent, a corporate debtor, had placed purchase orders for rolling mill machinery and equipment from the applicant. The applicant supplied the goods but was not paid the outstanding amount of Rs. 18,52,600. The respondent admitted the debt but failed to make the payment despite reminders and a demand notice. The applicant submitted relevant documents to support the claim, including invoices, demand notice, and communication records.

The respondent argued that it was not insolvent, facing only temporary financial difficulties, and had made offers to repay the debt, which were rejected by the applicant. The respondent denied receiving the goods and claimed there was no proof of delivery. However, the respondent's letter admitting the debt and requesting more time to settle the amount contradicted these claims. The respondent's arguments were deemed illusory, and the respondent failed to dispute the notice under Section 8 of the I & B Code.

The Tribunal found that the application was within the limitation period, the debt was not denied, and there was no pre-existing dispute. The documents provided by the applicant established the debt and default by the respondent in payment. The respondent never raised any dispute before the notice was issued. The Tribunal referred to a Supreme Court judgment to determine the existence of operational debt, due payment, and absence of disputes, concluding that the applicant met the requirements of the I & B Code.

The Tribunal ordered a moratorium under Section 13 of the Code, declaring the initiation of the Corporate Insolvency Resolution Process. An Interim Resolution Professional was appointed, and the moratorium was imposed to prohibit legal actions against the corporate debtor. Supply of goods and services to the debtor was to continue during the moratorium. The order would remain in effect until the completion of the resolution process or liquidation. The Registry was instructed to inform relevant parties about the order and prevent any actions that could hinder the resolution process.