2017 (9) TMI 855 - Tri - Insolvency and Bankruptcy

Tribunal Allows Petition for Corporate Insolvency Resolution Process (CIRP)

Maxim Tubes Company Pvt. Ltd. Versus International Coil Limited

Maxim Tubes Company Pvt. Ltd. Versus International Coil Limited - Tmi Issues Involved:1. Existence of debt and default by the Corporate Debtor.2. Pre-existing dispute claimed by the Corporate Debtor.3. Compliance with the Insolvency and Bankruptcy Code (IBC), 2016 provisions by the Operational Creditor.4. Maintainability of the Petition for initiating the Corporate Insolvency Resolution Process (CIRP).Issue-wise Detailed Analysis:1. Existence of Debt and Default by the Corporate Debtor:The Operational Creditor, a manufacturer and supplier of steel pipes, claimed that the Corporate Debtor placed two purchase orders for a compressed air piping system for a project in Kutch, Gujarat. The terms required 100% payment against a 60-day Letter of Credit. The Corporate Debtor failed to open the Letter of Credit, issuing post-dated cheques instead. Supplies were completed between July and August 2016. Despite partial payments totaling Rs. 89,68,660, a balance of Rs. 81,53,763 remained unpaid. Two cheques issued by the Corporate Debtor were dishonored. Consequently, the Operational Creditor issued a Form-4 invoice under Rule 5 of the IBC, 2016, claiming Rs. 91,96,269, including interest for delayed payment.2. Pre-existing Dispute Claimed by the Corporate Debtor:The Corporate Debtor argued that there was an existing dispute, questioning the maintainability of the Petition. They acknowledged placing the purchase orders but blamed the Operational Creditor for delays in approving the Letter of Credit format, leading to project delays. The Corporate Debtor issued cheques as security, which were dishonored upon presentation. They claimed the cheques were for security purposes only and should not have been deposited without their concurrence. Additionally, the Corporate Debtor cited ongoing criminal proceedings and alleged discrepancies in the amounts paid and received.3. Compliance with the Insolvency and Bankruptcy Code (IBC), 2016 Provisions by the Operational Creditor:The Tribunal examined the definitions of 'dispute,' 'debt,' and 'operational debt' under the IBC, 2016. It found no genuine dispute regarding the supply of goods or their quality. The Corporate Debtor’s email dated 15.10.2016 acknowledged the debt and promised payment, indicating no dispute over the amount or quality of goods. The Tribunal noted that the Corporate Debtor's reply dated 17.5.2017 to the notice of default was beyond the statutory period and did not constitute a valid dispute under the IBC.4. Maintainability of the Petition for Initiating the Corporate Insolvency Resolution Process (CIRP):The Tribunal found that the amount claimed exceeded the minimum threshold of Rs. 1 lakh required under the IBC. The Operational Creditor complied with Section 9(3) of the IBC by providing a certificate from the bankers and a statement of accounts. The Tribunal concluded that the Operational Creditor was entitled to initiate the CIRP as the debt remained unpaid, and there was no pre-existing dispute as claimed by the Corporate Debtor.Conclusion:The Tribunal allowed the Petition, initiating the CIRP against the Corporate Debtor. A moratorium was declared under Section 14 of the IBC, prohibiting suits, asset transfers, and recovery actions against the Corporate Debtor. The Insolvency and Bankruptcy Board of India (IBBI) was directed to recommend an Interim Resolution Professional (IRP). The Operational Creditor was instructed to deposit necessary funds for the IRP’s expenses. The order was to be communicated to both parties as per Section 9(5) of the IBC, 2016.