2017 (11) TMI 40 - Tri - Insolvency and Bankruptcy

Tribunal Orders Moratorium, Seeks Resolution Professional Recommendation

The Tribunal admitted the application, ordered a reference to the Insolvency and Bankruptcy Board of India to recommend an Interim Resolution ... Corporate Insolvency Resolution Process - default in payment of amount within due date the Invoice amount shall carry interest at the rate of two per cent - Held that:- As can be seen from the Computation Table at Annexure “A”, the amount claimed is in respect of the due amount for the Invoices from 21.7.2015 to 15.1.2016. The amount claimed in Annexure “B” is the amount claimed towards the interest on the Invoices for the period from 31.12.2014 to 31.3.2015 whereunder the actual Invoice amounts were paid with delay. A perusal of the Annexure “C” shows that it relates to the claim of interest on the Invoices from 21.7.2015 to 15.1.2016 for the delay in payments against actual invoice amount already paid. It is stated by the learned counsel for the Respondent that Invoices supplied to them along with the demand notice are not the Invoices for which the claim has been made. In the case on hand, the claim of the Applicant is in respect of Invoices for the period from 21.7.2015 to 15.1.2016 and also interest at the rate of 24% in respect of the Invoices for which the amounts were already paid and they relate to the period from 31.12.2014 to 31.3.2015 and 21.7.2015 to 15.1.2016. Moreover, in demand notice in Form-3 there is no need to enclose the Invoice. In view of the above said clarification, the point raised by the learned Counsel for the Respondent, that the Invoices furnished to them along with the demand notice are not the correct invoices, does not stand to reason and that cannot be a ground to reject the Application especially when the Respondent is admitting the operational debt. In view of the above discussion, this Application deserves to be admitted and it is accordingly admitted. The Applicant did not propose the name of the Insolvency Resolution Professional. The Applicant requested this Adjudicating Authority to appoint an Interim Resolution Professional. This Adjudicating Authority hereby order reference to Insolvency and Bankruptcy Board of India, New Delhi, to recommend the name of Insolvency Professional against whom no disciplinary proceedings are pending to this Authority within 10 (Ten) days from the date of receipt of reference to act as Interim Insolvency Resolution Professional. This Adjudicating Authority hereby declares moratorium under Section 13(1)(a) prohibiting the following as laid down in Section 14 of the Code Issues Involved:1. Validity of Demand Notice issued by an Advocate.2. Non-filing of Certificate under Section 9(3)(c) of the IB Code.3. Dispute regarding the quality of goods supplied.4. Authorization for initiating insolvency proceedings.5. Alleged defects in Form-3.6. Invoices attached with the Demand Notice.Detailed Analysis:1. Validity of Demand Notice Issued by an Advocate:The Respondent objected that the demand notice issued to them was not signed by an authorized person but by an Advocate, making it invalid. The Tribunal referred to the judgment in *Uttam Galva Steels Ltd. v. DF Deutsche Forfait AG & Anr.*, which held that an Advocate without authority from the Board of Directors cannot issue a notice under Section 8 of the IB Code. However, in this case, the Applicant filed a resolution dated 7th February 2017, authorizing J. Sagar Associates to issue the notice. The Tribunal found this authorization sufficient and concluded that the objection regarding the person issuing the notice was not sustainable.2. Non-filing of Certificate under Section 9(3)(c) of the IB Code:The Respondent argued that the Applicant did not initially file the required certificate from a financial institution. The Applicant later filed a certificate dated 4th September 2017 from Oriental Bank of Commerce, confirming no payments were received from the Respondent after 8th July 2016. The Tribunal found that the certificate sufficiently complied with Section 9(c) of the IB Code, as it reflected the non-payment of the claimed amount and interest.3. Dispute Regarding the Quality of Goods Supplied:The Respondent claimed that the goods supplied were defective, justifying deductions from the invoice amounts. The Tribunal noted that this issue was not raised prior to the demand notice or in the reply to it. The Applicant had already deducted amounts for defective goods, and the Respondent’s objection was raised only after the deductions. The Tribunal cited *Kirusa Software (P.) Ltd. v. Mobilox Innovations Private Limited*, emphasizing that disputes must be genuine and raised before the notice under Section 8. The Tribunal concluded that the dispute was not bona fide and was raised merely to obstruct the insolvency process.4. Authorization for Initiating Insolvency Proceedings:The Respondent contended that the resolution provided did not authorize the initiation of insolvency proceedings. The Tribunal reviewed the resolution dated 14th April 2017, which authorized the Managing Director to take actions related to filing the application. The Tribunal found this resolution sufficient to institute insolvency proceedings.5. Alleged Defects in Form-3:The Respondent argued that certain columns in Form-3 were omitted, rendering it invalid. The Tribunal noted that the omitted columns related to securities, which were not relevant in this case. Therefore, the deletion of these columns did not invalidate the notice.6. Invoices Attached with the Demand Notice:The Respondent claimed that the invoices attached to the demand notice were not the ones under which the amount was claimed. The Tribunal compared the annexures and exhibits and found them to be consistent. It clarified that there was no requirement to enclose invoices with the demand notice in Form-3. The Tribunal concluded that this objection was not a valid ground to reject the application, especially since the Respondent admitted the operational debt.Conclusion:The Tribunal admitted the application, ordered a reference to the Insolvency and Bankruptcy Board of India to recommend an Interim Resolution Professional, and declared a moratorium under Section 13(1)(a) prohibiting certain actions against the corporate debtor. The order of moratorium would be in force until the completion of the Corporate Insolvency Resolution Process. The Tribunal directed communication of the order to both parties and listed the matter for further proceedings after receiving the proposal from the Insolvency and Bankruptcy Board of India.