Tribunal Upholds Insolvency Process, Warns Non-Cooperation

The Tribunal upheld the initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor, dismissing the appeal as the impugned order did not exhibit material irregularity or patent illegality. The Tribunal emphasized the importance of cooperation with the Resolution Professional for the smooth functioning of the process, warning that non-cooperation could lead to prosecution under the Companies Act, 2013. The Appellant's contentions regarding various issues such as the validity of the demand notice, discrepancy in claimed amounts, and admissibility of evidence were largely rejected by the Tribunal.

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Issues Involved:
1. Validity of the Demand Notice.
2. Discrepancy in the amount claimed.
3. Pre-existing dispute regarding the quality of goods.
4. Admissibility of WhatsApp communications as evidence.
5. Jurisdiction and procedure of the Adjudicating Authority.
6. Additional evidence and documents submitted at the appellate stage.
7. Cooperation of the Corporate Debtor with the Resolution Professional.

Issue-wise Detailed Analysis:

1. Validity of the Demand Notice:
The Appellant contended that the Demand Notice under Form 3 and 4 dated 06.04.2018 mentioned a total debt of INR 18,63,840, while the application before the Adjudicating Authority mentioned INR 27,17,818, leading to a discrepancy. The Tribunal noted that a mistake in a Demand Notice does not necessarily invalidate it unless it causes prejudice to the Corporate Debtor. The Tribunal found no prejudice caused and upheld the validity of the Demand Notice.

2. Discrepancy in the Amount Claimed:
The Appellant argued that the amount in default should be INR 88,863, not INR 9.42 Lakhs, as claimed. The Tribunal observed that the sum in default was consistently mentioned as INR 9,42,841 in both the Demand Notice and the application. The Tribunal concluded that the discrepancy did not affect the validity of the claim, as the Corporate Debtor had not raised any objections within the stipulated period.

3. Pre-existing Dispute Regarding the Quality of Goods:
The Corporate Debtor claimed that low-quality and defective material was supplied. The Tribunal noted that no specific and categorical denial or evidence was provided by the Corporate Debtor to substantiate this claim. The WhatsApp communications and emails presented did not indicate any pre-existing dispute about the quality of goods. The Tribunal held that the defense was a mere bluster and not a genuine dispute.

4. Admissibility of WhatsApp Communications as Evidence:
The Appellant argued that WhatsApp communications were taken as conclusive evidence without a certificate under Section 65B of the Indian Evidence Act. The Tribunal stated that the Adjudicating Authority only took a cursory look at the WhatsApp communication and did not solely rely on it. The Tribunal found no fault in the Adjudicating Authority's approach.

5. Jurisdiction and Procedure of the Adjudicating Authority:
The Appellant contended that the amendment allowed by the Adjudicating Authority was beyond its jurisdiction. The Tribunal clarified that the amendment was to cure defects in Form V and did not change the debt amount. The Tribunal upheld the Adjudicating Authority's decision, stating that no prejudice was caused to the Corporate Debtor.

6. Additional Evidence and Documents Submitted at the Appellate Stage:
The Appellant sought to submit additional documents to show a pre-existing dispute. The Tribunal allowed only certain judicial orders to be placed on record, while rejecting other documents as they did not bind the First Respondent and were not relevant to the issues at hand. The Tribunal emphasized that additional evidence is not permitted to remove lacunae in a litigant's record.

7. Cooperation of the Corporate Debtor with the Resolution Professional:
The Tribunal noted that the Corporate Debtor failed to cooperate with the Resolution Professional despite multiple communications. The Tribunal highlighted the importance of cooperation for the smooth functioning of the Insolvency Resolution Process and pointed out that the former management's non-cooperation could lead to prosecution under Section 425 of the Companies Act, 2013.

Conclusion:
The Tribunal dismissed the appeal, stating that the impugned order passed by the Adjudicating Authority did not suffer from any material irregularity or patent illegality. The Tribunal upheld the initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor and directed the Appellant to furnish the certified copy of the impugned order within ten days.

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