Chandigarh Tribunal Admits CIRP Petition for Operational Debt, Declares Moratorium

The National Company Law Tribunal, Chandigarh, admitted the petition for Corporate Insolvency Resolution Process (CIRP) against the respondent due to outstanding operational debt. The Tribunal declared a moratorium, halting legal actions against the debtor and asset disposal. An Interim Resolution Professional was appointed, and essential services were to continue during the process. The respondent's dispute over the quality of goods supplied did not prevent the initiation of CIRP. The case was scheduled for further orders regarding the Interim Resolution Professional's appointment.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Jurisdiction of the Tribunal
3. Existence of Operational Debt and Default
4. Dispute regarding Quality of Goods
5. Compliance with Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC)
6. Appointment of Interim Resolution Professional (IRP)
7. Declaration of Moratorium

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petitioner initiated the CIRP against the respondent under Section 9 of the Insolvency and Bankruptcy Code, 2016, read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The petitioner, a commission agent, supplied paddy to the respondent and raised invoices accordingly. The respondent failed to make payments, leading to a demand notice and subsequent reminder, with no repayment or dispute notice from the respondent.

2. Jurisdiction of the Tribunal:
The respondent, M/s Tara Chand Rice Mills Pvt. Ltd., is an exporter, producer, and supplier of rice, incorporated under the Companies Act, 1956, with its registered office in Haryana. The matter falls under the jurisdiction of the National Company Law Tribunal, Chandigarh.

3. Existence of Operational Debt and Default:
The petitioner maintained a running account reflecting a debit balance of Rs. 2,23,89,593/- as of 27.07.2017, which was due and outstanding against the respondent. The petitioner issued a demand notice on 05.09.2017, followed by a reminder on 27.09.2017. The respondent acknowledged the liability but did not make any repayment.

4. Dispute regarding Quality of Goods:
The respondent contended that there was a dispute regarding the quality of the paddy supplied, claiming that a significant portion of the paddy was of inferior quality and contained high moisture, leading to its rejection. The respondent alleged that the petitioner was informed about the quality issues and requested to recall the inferior paddy, which the petitioner allegedly refused. The respondent processed and sold the rejected paddy at a lower value and offered to settle the account, which the petitioner denied.

5. Compliance with Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC):
The Tribunal found that the requirements of Section 9(1) to (3) of the IBC were satisfied. The petition was filed more than 10 days after the delivery of the demand notice. The petitioner filed an affidavit affirming no dispute of unpaid operational debt and provided a certificate from HDFC Bank confirming no payment received from the corporate debtor. The Tribunal noted that the defects in the application were timely rectified, and the documents filed were carefully considered.

6. Appointment of Interim Resolution Professional (IRP):
The petitioner proposed Mr. Sameer Rastogi as the Interim Resolution Professional, filing the required written communication in Form 2. The Tribunal found the form to be in order, with no pending disciplinary proceedings against the proposed IRP.

7. Declaration of Moratorium:
The Tribunal admitted the petition and declared a moratorium prohibiting:
- Institution or continuation of suits or proceedings against the corporate debtor.
- Transferring, encumbering, or disposing of any assets or legal rights of the corporate debtor.
- Actions to foreclose, recover, or enforce any security interest.
- Recovery of any property occupied by the corporate debtor.

The supply of essential goods or services to the corporate debtor was directed to continue during the moratorium period. The moratorium would remain in effect until the completion of the CIRP, approval of the resolution plan, or liquidation order.

The matter was listed for further orders on the appointment of the Interim Insolvency Resolution Professional on 21.03.2018, and copies of the order were to be communicated to both parties.

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