2018 (11) TMI 1641 - Tri - Insolvency and Bankruptcy

Tribunal Admits Petition under Insolvency Code, Initiates Resolution Process

The Tribunal admitted the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, finding the operational debt and default established. It ... Initiation of Corporate Insolvency Resolution Process - Corporate debtor - whether there is existence of dispute between the parties relating to the operational debt before the issuance of the demand notice? - HELD THAT:- The application submitted by the petitioner is complete in all respects and in the absence of the existence of any dispute, the ingredients of Sub-section 5(i) of Section 9 of the Code are established. The petition, therefore, is admitted. Petition admitted - Moratorium declared. Issues Involved:1. Initiation of Insolvency Resolution Process.2. Existence of Operational Debt and Default.3. Alleged Pre-existing Dispute.4. Validity of Demand Notice and Response.5. Appointment of Interim Resolution Professional.6. Moratorium Declaration.Issue-wise Detailed Analysis:1. Initiation of Insolvency Resolution Process:The petition was filed by the operational creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Insolvency Resolution Process against the corporate debtor. The operational creditor passed a resolution authorizing its directors to file the petition and perform necessary acts for the case's progress. The application was filed in Form 5 as prescribed in Rule 6(1) of Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016.2. Existence of Operational Debt and Default:The petitioner, a manufacturer and supplier of high-quality kraft paper, supplied goods to the respondent based on various purchase orders. The last invoice was issued on 08.11.2017. Despite multiple reminders, the respondent confirmed an outstanding liability of Rs. 4,61,85,364.50 on 09.02.2018 and issued cheques for the balance amount. However, many cheques were dishonored, and a total amount of Rs. 4,48,85,364/- remained outstanding as of 23.03.2018. The petitioner sent a demand notice under Section 8 of the Code, which was duly served on the corporate debtor.3. Alleged Pre-existing Dispute:The respondent claimed no amount was due, alleging the invoices included amounts for goods supplied to third parties (Charan Kamal Card Board Paper Mills Pvt. Ltd. and Kronos Packaging Pvt. Ltd.) and not just to the respondent. The respondent argued that the cheques were undated security cheques misused by the petitioner and disputed the validity of the balance confirmation dated 09.02.2018, alleging it was signed under pressure. However, the Tribunal found no pre-existing dispute as the respondent admitted the liability through various communications and undertakings.4. Validity of Demand Notice and Response:The demand notice was sent on 27.03.2018, and the respondent's reply was received after the expiry of the 10-day period. The Tribunal found the reply contained bald averments without substantive proof and was an afterthought to defeat the operational creditor's rights. The Tribunal referred to the Supreme Court's decision in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd., emphasizing that a plausible contention of dispute must be supported by evidence, which the respondent failed to provide.5. Appointment of Interim Resolution Professional:The petitioner did not propose any registered Resolution Professional, leaving the matter for the Tribunal. The Tribunal appointed Mr. Somnath Gupta as the Interim Resolution Professional, directing him to perform duties as per the Code and prepare an inventory of the corporate debtor's assets.6. Moratorium Declaration:The Tribunal declared a moratorium, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovery of property by owners or lessors. The moratorium will remain effective until the completion of the corporate insolvency resolution process or until the Tribunal approves a resolution plan or orders liquidation.Conclusion:The Tribunal admitted the petition, finding it complete and establishing the ingredients of Sub-section 5(i) of Section 9 of the Code. The Tribunal directed the initiation of the Corporate Insolvency Resolution Process, declared a moratorium, and appointed an Interim Resolution Professional to manage the process.