2020 (5) TMI 196 - Tri - Insolvency and Bankruptcy

Tribunal Admits Petition for Corporate Insolvency Resolution Process under Insolvency & Bankruptcy Code

The Tribunal admitted the petition, initiating the Corporate Insolvency Resolution Process, appointing an Interim Resolution Professional, and declaring a ... Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of its debt - Existence of debt and dispute or not - Time Limitation - HELD THAT:- The Corporate Debtor has not filed communications to the Operational Creditor raising any dispute with regard to poor quality of sacks/packing bags used for supply of the material. The alleged dispute is raised for the first time after filing of the Petition against Corporate Debtor. Time Limitation - Allegation that the claim is barred by limitation on the ground that last transaction was on 11-6-2016 and payment was also made on 23-5-2015. The Petition is barred by limitation which was filed on 24-7-2019 - HELD THAT:- Of course it is the duty of Operational Creditor to file receipts raised for making payments to the Corporate Debtor. However, the limitation starts from the expiry of period given in the purchase order. We have seen the purchase order and invoice attached to written submissions cum rejoinder. 60 days' time is given for payment. The last invoice is on 11-6-2016. The payment under the invoice is within 60 days. Therefore, limitation to start after expiry of 60 days. The petition is filed on 24-7-2019 is therefore, within the period of limitation. Demand notice was not issued and served on the Corporate Debtor. The petition is in order and is liable to be admitted - application admitted - moratorium declared. Issues Involved:1. Default in payment by Corporate Debtor.2. Allegation of poor quality of goods supplied.3. Limitation period for filing the petition.4. Pre-existing dispute.5. Appointment of Interim Resolution Professional.6. Declaration of moratorium.Issue-wise Detailed Analysis:1. Default in Payment by Corporate Debtor:The Petitioner, M/s. S.S.V. Fab Industries Private Limited, alleged that the Corporate Debtor, M/s. SNS Starch Limited, defaulted in paying Rs. 22,58,154, which includes the principal amount of Rs. 12,29,300 and interest of Rs. 10,28,854 at 24% per annum from 27-10-2015 to 22-7-2019. The debt arose from the Corporate Debtor's failure to make payment for goods supplied by the Petitioner.2. Allegation of Poor Quality of Goods Supplied:The Corporate Debtor contended that the material supplied by the Petitioner was of poor quality, causing significant losses. The sacks used for packing were alleged to tear during transportation, leading to spillage and unusable material. The Corporate Debtor claimed to have communicated these issues to the Petitioner and was assured of credit notes, which were never issued.3. Limitation Period for Filing the Petition:The Corporate Debtor argued that the petition was barred by limitation, as the transactions occurred between 27-10-2015 and 11-6-2016, with the last payment made on 23-5-2015. The petition was filed on 24-7-2019, beyond the three-year limitation period under Article 137 of the Limitation Act. However, the Petitioner contended that the ledger account showed the last transaction on 23-9-2018, making the petition within the limitation period. The Tribunal noted that the limitation starts from the expiry of the period given in the purchase order, which included a 60-day grace period, making the petition timely.4. Pre-existing Dispute:The Tribunal found no substantial evidence of a pre-existing dispute regarding the quality of goods. The Corporate Debtor failed to provide communications to the Petitioner raising such issues before the petition was filed. Citing the Supreme Court's decision in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd., the Tribunal emphasized that a dispute must be genuine and not hypothetical or illusory. Since no material evidence was provided, the alleged dispute was not considered valid.5. Appointment of Interim Resolution Professional:The Tribunal appointed Mr. Ritesh Mittal as the Interim Resolution Professional (IRP), as recommended by the Insolvency and Bankruptcy Board of India (IBBI). The IRP was directed to file his written communication and relevant documents within two days.6. Declaration of Moratorium:The Tribunal admitted the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, and declared a moratorium. The moratorium prohibits:- Institution or continuation of suits or proceedings against the Corporate Debtor.- Transferring, encumbering, or disposing of the Corporate Debtor's assets.- Actions to foreclose, recover, or enforce security interests.- Recovery of property by an owner or lessor in possession of the Corporate Debtor.The supply of essential goods or services to the Corporate Debtor shall continue uninterrupted during the moratorium period. The moratorium will remain effective from 20-12-2019 until the completion of the Corporate Insolvency Resolution Process or until a resolution plan is approved or liquidation is ordered.The Petitioner was directed to pay Rs. 1,00,000 to the IRP for expenses, subject to adjustment by the committee of creditors. Public announcement of the Corporate Insolvency Resolution Process was to be made immediately as specified under Section 13 of the Code.Conclusion:The Tribunal admitted the petition, initiating the Corporate Insolvency Resolution Process, appointing an IRP, and declaring a moratorium as per the provisions of the Insolvency and Bankruptcy Code, 2016.