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 creditor's claim of default in payment by the corporate debtor was upheld, leading to the admission of the petition under section 9 of the IBC. The Tribunal found the petition complete and ordered the initiation of Corporate Insolvency Resolution Process (CIRP), declaring a moratorium and appointing an Interim Resolution Professional (IRP). The decision effectively commenced the CIRP against the corporate debtor.

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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.

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