2019 (9) TMI 1356 - Tri - Insolvency and Bankruptcy

Tribunal Ruling: Creditor Wins in Insolvency Petition Case

M/s. SVG Fashions Limited Versus M/s. Arpita Filaments Private Limited

The tribunal found in favor of the operational creditor in the insolvency petition case. It determined that there was an operational debt exceeding Rs. 1 ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of dispute or not - HELD THAT:- A combined reading of the application and the reply filed by the respondent it is evident that the respondent has failed to make payment against the goods supplied by the operational creditor and now creating various stories to defend himself. We must refer to the legislation guide on Insolvency Law of United Nations Commission on International Trade Law. One of the things the Legislative Guide spoke about was whether the debt is subject to a legitimate dispute or set off, in an amount equal to or greater than the amount of the debt - this adjudicating authority is of the considered view that operational debt is due to the Applicant. That, service is complete and no dispute has been raised by the respondent. That, Applicant is an Operational Creditor within the meaning of sub-section (5) of Section 20 of the Code. From the aforesaid material on record, petitioner is able to establish that there exists debt as well as occurrence of default. The Application filed by the Applicant on 20th April, 2018 is complete in all respects - Application admitted - moratorium declared. Issues Involved:1. Service of demand notice.2. Authority to issue demand notice and sign insolvency petition.3. Time-barred invoices.4. Signing of Form 5 by advocate.Issue-wise Detailed Analysis:1. Service of Demand Notice:The corporate debtor contended that there was no service of demand notice by the operational creditor. However, the tribunal found that the operational creditor provided proof of dispatch, confirming that the demand notice was duly served. Therefore, this objection was deemed unsustainable.2. Authority to Issue Demand Notice and Sign Insolvency Petition:The corporate debtor argued that there was no board resolution authorizing Mr. D.M. Agrawal to issue the demand notice and that the advocate did not have the authority to sign the insolvency petition. The tribunal reviewed the additional affidavit filed by the operational creditor, which included a board resolution authorizing Mr. D.M. Agrawal to file the petition. Furthermore, it was established that an advocate can issue a demand notice on behalf of the operational creditor, as settled by the Hon'ble Supreme Court. Thus, this objection was also dismissed.3. Time-barred Invoices:The corporate debtor claimed that the invoices were from 2013 and thus time-barred. The tribunal examined the evidence and found that the corporate debtor had issued six cheques on 28.09.2015, acknowledging the debt. This acknowledgment meant the claim was not time-barred, as the petition was filed within the limitation period. The tribunal dismissed the corporate debtor's story about missing cheques as concocted, noting inconsistencies in the dates and lack of supporting documents.4. Signing of Form 5 by Advocate:The corporate debtor objected that Form 5 was signed by an advocate. The tribunal found that every page of Form 5 was initialed by Mr. D.M. Agrawal, who had the authority as per the board resolution dated 20.12.2017. Therefore, the application was deemed complete in all respects.Findings and Conclusion:The tribunal determined that:- There was an operational debt exceeding Rs. 1 lakh.- The debt was due, payable, and had not been paid.- No legitimate dispute existed between the parties.The tribunal referenced the legislative guide on Insolvency Law by the United Nations Commission on International Trade Law and the Hon'ble Supreme Court judgment, concluding that the operational debt was due and the application was complete. The petition was admitted, and a moratorium was declared, prohibiting various actions against the corporate debtor as per Section 14 of the Code.Appointment of Interim Resolution Professional:The tribunal appointed Shri Pankaj Nahata as the Interim Resolution Professional, as the operational creditor had not proposed any name.Moratorium:The moratorium was declared, prohibiting:- Institution or continuation of suits or proceedings.- Transfer or disposal of assets.- Enforcement of security interests.- Recovery of property occupied by the corporate debtor.The supply of essential goods and services to the corporate debtor was to continue uninterrupted during the moratorium period.Disposition:The petition was disposed of with no order as to costs, and the order was to be communicated to all relevant parties.