2020 (6) TMI 391 - Tri - Insolvency and Bankruptcy

Tribunal Admits Creditor's Petition for Insolvency Against Debtor

Surya Alloy Industries Ltd. Versus Jay Prestressed Products Ltd.

The Tribunal admitted the operational creditor's petition under Sec.9 of the Insolvency & Bankruptcy Code, 2016 against the corporate debtor for ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- It is noted that the supplies have been made by the operational creditor to the corporate debtor who has used such supplies to make the final products for consumption of its client i.e. the railway. It is also noted that such supplies were made by the operational creditor after inspection and approval by RITES Ltd., which is the competent authority, hence, there cannot be a dispute regarding the quality of material supplied by the operational creditor. It is further noteworthy that the operational creditor filed a civil suit for recovery of its amount before the Hon'ble High Court, Calcutta which passed a decree in favour of the operational creditor which remained non-complied by the corporate debtor. Even, application for recalling of said decree filed by the corporate debtor has been dismissed by the Hon'ble High Court. There is no case of suppression of any material fact. Further, no material of whatsoever nature has been brought on record to show that there exists some dispute except making oral allegations within the meaning of Sec.5(6) of the Insolvency & Bankruptcy Code, 2016 prior to initiation of this proceedings. Thus, there is an operational debt which is due and a default has occurred, hence, on merits the case of operational creditor succeeds. The petition is otherwise complete in all respects and complies with the requirements of provisions of Insolvency & Bankruptcy Code, 2016 read with regulations thereto. Application admitted - moratorium declared. Issues: Petition under Sec.9 of the Insolvency & Bankruptcy Code, 2016 for initiation of corporate insolvency resolution process due to default in payment by the corporate debtor.Analysis:1. The operational creditor filed a petition under Sec.9 of the Insolvency & Bankruptcy Code, 2016 against the corporate debtor for defaulting on payment amounting to Rs. 83,27,646/-, including interest. The operational creditor supplied materials as per purchase orders, and the corporate debtor partially paid but failed to clear the balance amount.2. The operational creditor also obtained a decree from the Hon'ble High Court, Calcutta, directing the corporate debtor to pay Rs. 74,10,686/- with interest. Despite this decree, the corporate debtor did not comply with the court's order.3. The corporate debtor raised a point about filing an application before the High Court to recall the decree, but the operational creditor argued that no material was provided to substantiate this claim. The operational creditor presented evidence of supply orders, inspection certificates, invoices, and payment receipts to support their case.4. The corporate debtor claimed quality issues with the supplied materials, leading to rejection by the railway, causing financial losses. However, the operational creditor countered this claim by stating that the materials were approved by RITES Ltd., and no rejection occurred as per an RTI inquiry.5. The Tribunal noted that the operational creditor's supplies were used by the corporate debtor to manufacture products for the railway after inspection by RITES Ltd. The High Court's decree in favor of the operational creditor remained unfulfilled, and the corporate debtor's application to recall the decree was dismissed.6. The Tribunal found no material dispute raised by the corporate debtor, except oral allegations, prior to the insolvency petition. As per Sec.5(6) of the Code, an operational debt was due, and a default had occurred, leading to the admission of the operational creditor's application.7. The Tribunal approved the appointment of an Interim Resolution Professional and declared a moratorium, initiating the Corporate Insolvency Resolution Process against the corporate debtor. The operational creditor was directed to pay an advance fee to the IRP for the resolution process.8. The Resolution Professional was tasked to conduct the Corporate Insolvency Resolution Process in a time-bound manner, with the matter listed for a progress report filing. The order was to be communicated to all parties involved, and a certified copy would be issued upon formal application.