2017 (8) TMI 1197 - Tri - Insolvency and Bankruptcy

Tribunal admits petition for Corporate Insolvency Resolution Process, finds dispute belated.

Surbhi Body Products (P) Limited, Godolo and Godolo Export (P) Ltd. Through its Authorized Representative Binod Yadav Versus Meyer Apparel Ltd. (Erstwhile Givo Limited) Through its Director

The Tribunal admitted the petition for the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor, declaring a moratorium and ... Insolvency Resolution Process - pending suits or proceedings against the 'Corporate Debtor' - Held that:- There is no dispute existing in the present case as tried to be set up by the respondent and the petition which complies with various requirements, deserves to be admitted. The petition, therefore, is admitted declaring the moratorium with the following directions: i) That the Bench hereby prohibits the institution of suits or continuation of pending suits or proceedings against the 'Corporate Debtor' including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; any action to foreclose, recover or enforce any security interest created by the 'Corporate Debtor' in respect of its property including any action under the Securitization and Reconstructs of Financial Assets and Enforcement of Security Interest Act, 2002; the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor. ii) That the supply of essential goods or services to the 'Corporate Debtor', if continuing, shall not be terminated or suspended or interrupted during moratorium period iii) That the provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. iv) That the order of moratorium shall have effect from the date of this order till completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under Section 33 as the case may be. Since the name of Interim Resolution Professional has not been proposed by the Applicant, we direct that a reference be made to the Insolvency and Bankruptcy Board of India for recommending an Insolvency Professional, who may act as Interim Resolution Professional in terms of sub-section (3) and (4) of Section 16 of the Code. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (IRP) under Section 2 of the Insolvency and Bankruptcy Code, 2016.2. Existence of a dispute regarding the quality of goods supplied.3. Compliance with procedural requirements under Section 9 of the Code.4. Determination of whether the petition is maintainable given the alleged dispute.Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (IRP) under Section 2 of the Insolvency and Bankruptcy Code, 2016:The petitions were filed to initiate the Corporate Insolvency Resolution Process (IRP) against the Corporate Debtor under Section 2 of the Insolvency and Bankruptcy Code, 2016. The petitioner, an Operational Creditor, sought to recover dues from the Corporate Debtor, who had changed its name from M/s. Givo Limited to M/s. Meyer Apparel Limited.2. Existence of a dispute regarding the quality of goods supplied:The Corporate Debtor raised a dispute regarding the quality of goods supplied by the Operational Creditor. They claimed that the goods were of inferior quality and that the readymade garments manufactured using these goods were rejected by their customers. This dispute was first raised in a letter dated 04.09.2015, which the Tribunal found to be a counterblast to the legal notice sent by the Operational Creditor. The Tribunal noted that the dispute was raised more than a year after the last transaction and appeared to be an afterthought to defend against the winding-up petition.3. Compliance with procedural requirements under Section 9 of the Code:The Tribunal confirmed that the application was filed in the prescribed format and included all necessary documents as required under Section 9 of the Code. The Operational Creditor had sent a demand notice dated 15.02.2017, which was duly received by the Corporate Debtor. The Corporate Debtor's reply dated 28.02.2017 did not attach any copy of the plaint of the alleged civil suit, nor did it mention the suit number or date of institution, leading the Tribunal to conclude that the civil suit was likely not entertained by the Civil Court at that time.4. Determination of whether the petition is maintainable given the alleged dispute:The Tribunal examined whether the dispute raised by the Corporate Debtor was genuine and bona fide. It referred to several judgments, including 'Paharpur 3P (A Division of Paharpur Cooling Towers Limited) versus Dalmia Consumer Care Private Limited,' which held that highly belated disputes about the quality of goods supplied do not give rise to a bona fide dispute. The Tribunal concluded that the dispute raised by the Corporate Debtor was not genuine and was only an afterthought to avoid payment. Therefore, the petition was found to be maintainable.Conclusion:The Tribunal admitted the petition, declaring a moratorium and prohibiting the institution of suits or continuation of pending suits against the Corporate Debtor. The Tribunal directed the Insolvency and Bankruptcy Board of India to recommend an Insolvency Professional to act as the Interim Resolution Professional. The matter was fixed for further directions on 24.04.2017.