2017 (11) TMI 1579 - Tri - Insolvency and Bankruptcy

Insolvency application dismissed due to lack of evidence and defective notice

The application filed under section 9 of the Insolvency and Bankruptcy Code seeking initiation of Corporate Insolvency Resolution Process against the ... Corporate Insolvency Resolution Process - proof of existing debt - Held that:- The applicant has miserably failed to establish the existence of operational debt as well commission of default by the respondent-company. It is pertinent to state here that the legal notice dated 22nd November, 2016 issued by the applicant, inter alia, reveals that the respondent vide e-mail dated 16th September, 2016 disputed and denied the claim of the applicant. The said e-mail dated 16th September, 2016 has not been enclosed. It is further seen at Annexure-J that the respondent-company in its undated letter, inter alia, disputed the claim as wrong and unordered for. Needless to say that when the claim is not admitted and clearly disputed by the respondent, it become more onerous on the applicant to prove its claim by adducing sufficient documentary evidence. However, no such documentary evidence could be produced to bind the respondent as corporate debtor and to satisfy existence of default in payment of corporate debt. As a sequel to the above discussions the application is rejected. Issues:- Application filed under section 9 of the Insolvency and Bankruptcy Code, 2016- Jurisdiction of the Adjudicating Authority- Alleged default by the respondent-company- Defective notice issued by the applicant's advocate- Burden of proof on the applicant- Lack of documentary evidence to prove default- Rejection of the applicationAnalysis:The application was filed under section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process against the respondent corporate debtor. The applicant, a proprietary firm, alleged that the respondent company had defaulted on payments for supplied materials. The respondent company was incorporated under the Companies Act, 1956, with its registered office in Delhi, falling under the territorial jurisdiction of the Tribunal.The applicant claimed that the respondent had induced them not to charge Central Sales Tax (CST) against Form 'C' to be furnished separately, resulting in a dispute over the payment of CST at a concessional rate. The applicant provided invoices and purchase orders as evidence of the transactions. However, the notice issued by the applicant's advocate was found to be defective as per the prescribed format under the Code, leading to a rejection of the application solely on this ground.Under Section 6 of the Code, an operational creditor must prove the existence of default by the corporate debtor, with the burden of proof lying on the applicant. The applicant failed to provide signed documents such as purchase orders and instructions to substantiate the claim of default. Additionally, the claim for interest and sales-tax dues lacked supporting documents, rendering them unsubstantiated.Despite the respondent disputing the applicant's claims in correspondence, the applicant could not provide sufficient documentary evidence to establish the default in payment by the respondent. The Tribunal emphasized the importance of documentary evidence in proving operational debt and default. Consequently, the application was rejected, clarifying that the decision did not prejudice the applicant's rights to pursue the matter in other forums.In conclusion, the rejection of the application was primarily due to the lack of documentary evidence to support the claims of default and operational debt. The defective notice issued by the applicant's advocate further contributed to the dismissal of the application, highlighting the significance of adhering to procedural requirements in insolvency proceedings.