Tribunal admits petition against Canaan Engineering for debt default, appoints Resolution Professional

The tribunal admitted the petition filed by Shine & Shine Enterprises against Canaan Engineering Private Limited for defaulting on operational debt. The Corporate Debtor acknowledged the debt, but the tribunal found no substantial evidence of a pre-existing dispute. The tribunal appointed an Interim Resolution Professional and declared a moratorium under section 14 of the Insolvency & Bankruptcy Code, prohibiting certain actions against the Corporate Debtor. Compliance reports were required to be submitted promptly.

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Issues Involved:
1. Default in payment of operational debt.
2. Acknowledgment of debt by the Corporate Debtor.
3. Existence of a pre-existing dispute.
4. Withdrawal and re-filing of the insolvency petition.
5. Appointment of Interim Resolution Professional (IRP).
6. Declaration of moratorium under section 14 of the I&B Code.

Detailed Analysis:

1. Default in Payment of Operational Debt
The petitioner, Shine & Shine Enterprises, filed a company petition under section 9 of the Insolvency & Bankruptcy Code, 2016, against Canaan Engineering Private Limited for initiating the Corporate Insolvency Resolution Process (CIRP). The Corporate Debtor defaulted in paying Rs. 25,54,786.91 against various invoices for the supply of goods related to welding fabrication of industrial consumables. The principal amount in default was Rs. 15,53,849, with an interest of Rs. 10,00,937.91.

2. Acknowledgment of Debt by the Corporate Debtor
The Operational Creditor argued that the Corporate Debtor accepted the invoices and challans, proving the debt's acknowledgment. Additionally, a letter dated 05.11.2015 from the Corporate Debtor admitted an outstanding unpaid debt of Rs. 18,51,451 and proposed a payment schedule. The Corporate Debtor made a payment of Rs. 3,00,000 till 14.10.2016 but failed to clear the remaining debt.

3. Existence of a Pre-existing Dispute
The Corporate Debtor claimed an existing dispute, alleging that the Operational Creditor, in collusion with an ex-employee, caused a loss to the company by supplying materials at higher prices. However, the tribunal found no substantial evidence supporting this claim. The tribunal referenced the Supreme Court's judgment in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, emphasizing that a dispute must be pre-existing and not a mere assertion without evidence.

4. Withdrawal and Re-filing of the Insolvency Petition
The Operational Creditor initially filed an insolvency petition on 01.07.2017, which was withdrawn on 06.09.2017 due to technical lapses, with liberty to file afresh. The current petition was filed on 27.03.2018. The tribunal noted that the Corporate Debtor attempted to create a dispute after the first petition's withdrawal, which was considered an afterthought.

5. Appointment of Interim Resolution Professional (IRP)
The tribunal observed that the Operational Creditor did not propose an IRP's name. Consequently, the tribunal appointed Mr. Anish Gupta, Registration No. IBBI/IAP-002/IP-N00285/2017-18/10843, as the IRP with his consent in Form 2, confirming no disciplinary proceedings against him.

6. Declaration of Moratorium under Section 14 of the I&B Code
The tribunal admitted the petition and declared a moratorium under section 14 of the I&B Code, prohibiting:
- The institution or continuation of suits or proceedings against the Corporate Debtor.
- Transferring, encumbering, or disposing of any assets or legal rights.
- Actions to foreclose or enforce any security interest.
- Recovery of any property occupied by the Corporate Debtor.

The tribunal also ensured the supply of essential goods or services to the Corporate Debtor would not be interrupted during the moratorium period. The moratorium would remain effective until the completion of the CIRP or the approval of a resolution plan or liquidation order.

Order
The tribunal directed the registry to communicate the order to the Operational Creditor, Corporate Debtor, and IRP immediately. The compliance report by the designated registrar was to be submitted on the same day.

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