2020 (1) TMI 1419 - Tri - Insolvency and Bankruptcy

NCLT Mumbai Bench-IV upholds operational creditor's claim, admits petition under IBC Section 9

The National Company Law Tribunal, Mumbai Bench-IV, established jurisdiction based on the corporate debtor's registered office location. The operational ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make payment of its dues - corporate debtor has filed a reply to the petition stating therein that the goods supplied by the operational creditor were defective and not of standard quality - service of demand notice - Cheque stated to have been given as security - rebuttal of presumption or not - existence of debt and dispute or not - HELD THAT:- Since the e-mail dated January 16, 2014 specifically notes that 'in the last batch of carbon fibre reinforced laminates, several imperfections were found', it can only be taken that the other consignments were defect-free. Further, in the rejoinder, the operational creditor has taken a specific stand that the issue of defective quality of supplies has been raised in only one out of twenty-seven consignments, and that this issue was also resolved. Even if the issue is assumed to be unresolved, this would only cover one consignment, and there is no reason why the other consignments ought not to be paid for, especially when seen in the context of the specific stand of the operational creditor that after the issue raised in the e-mail of January 16, 2014 four more consignments were supplied to the corporate debtor. Cheque stated to have been given as security - HELD THAT:- This cannot be taken to be a valid defence. In terms of section 139 of the Negotiable Instruments Act, 1881, there is a presumption that the holder of a cheque received the cheque for the discharge, in whole or in part, of any debt or other liability. While this is no doubt a rebuttable presumption, the presumption stands unless the contrary is proved. The burden of proof is on the corporate debtor. The petition made by the operational creditor is complete in all respects as required by law. It clearly shows that the corporate debtor is in default of a debt due and payable, and the default is in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the petition - Petition admitted - moratorium declared. Issues Involved:1. Jurisdiction of the Tribunal.2. Default in payment by the corporate debtor.3. Quality of goods supplied by the operational creditor.4. Issuance and dishonor of cheques.5. Service of demand notice.6. Admissibility of the petition under section 9 of the IBC.7. Initiation of Corporate Insolvency Resolution Process (CIRP).Issue-wise Detailed Analysis:1. Jurisdiction of the Tribunal:The Tribunal established its jurisdiction based on the registered office of the corporate debtor being within its territorial limits. The corporate debtor is registered in Mumbai, Maharashtra, thus falling under the jurisdiction of the National Company Law Tribunal, Mumbai Bench-IV.2. Default in Payment by the Corporate Debtor:The operational creditor, M/s. Ercon Composites, claimed that the corporate debtor, R & M International P. Ltd., failed to make payment of Rs. 69,76,937 as principal with interest at 18% per annum. The corporate debtor had acknowledged the debt and agreed to pay it in installments, but only the first installment of Rs. 10,00,000 was paid, leaving an outstanding amount of Rs. 69,76,937.3. Quality of Goods Supplied by the Operational Creditor:The corporate debtor contended that the goods supplied were defective and not of standard quality, as communicated via an email dated January 16, 2014. However, the operational creditor argued that the issue of defective quality was raised only for one out of twenty-seven consignments and was resolved. The Tribunal noted that the specific issue was with one consignment and did not justify non-payment for other consignments.4. Issuance and Dishonor of Cheques:The corporate debtor issued a cheque for Rs. 69,76,937, which bounced upon presentation. The corporate debtor claimed the cheque was issued as security and due to unresolved disputes, requested the operational creditor not to deposit it. The Tribunal held that under section 139 of the Negotiable Instruments Act, 1881, there is a presumption that the cheque was for discharge of debt unless proven otherwise by the corporate debtor, which they failed to do.5. Service of Demand Notice:The corporate debtor argued that no demand notice was served. However, the operational creditor issued a statutory notice under section 433 read with section 434 of the Companies Act, 1956, and later a demand notice under section 8 of the IBC, which was returned unserved. The Tribunal found that the operational creditor had complied with the requirements of issuing a demand notice.6. Admissibility of the Petition under Section 9 of the IBC:The Tribunal found the petition complete in all respects as required by law, showing that the corporate debtor was in default of a debt exceeding the minimum threshold of Rs. 1,00,000 stipulated under section 4(1) of the IBC. The Tribunal concluded that the default was established, and there was no reason to deny the admission of the petition.7. Initiation of Corporate Insolvency Resolution Process (CIRP):The Tribunal admitted the petition and ordered the initiation of CIRP against the corporate debtor. A moratorium under section 14 of the IBC was declared, prohibiting the institution or continuation of suits, transferring assets, and other actions against the corporate debtor. The Tribunal also ordered the public announcement of the CIRP and the appointment of an Interim Resolution Professional (IRP).Order Summary:- The petition for initiating CIRP against the corporate debtor was admitted.- A moratorium was declared under section 14 of the IBC.- Public announcement of the CIRP was ordered.- The Tribunal would appoint an IRP by a separate order.- The operational creditor was directed to deposit Rs. 1,00,000 with the IRP for expenses.- The registry was instructed to communicate the order to relevant parties and update the master data of the corporate debtor.The Tribunal's decision effectively initiated the CIRP against the corporate debtor, providing a structured process for resolving the insolvency.