2021 (12) TMI 6 - Tri - Insolvency and Bankruptcy

Company Petition under Insolvency & Bankruptcy Code admitted after Corporate Debtor's admission of liability

The National Company Law Tribunal, Mumbai Bench, admitted a Company Petition under the Insolvency & Bankruptcy Code, 2016, filed by an Operational ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - HELD THAT:- This bench notes that the Corporate has filed the reply claiming that the Petitioner has supplied excess quantities as against the purchase orders issued by the Corporate Debtor. The Corporate Debtor also pointed out that the Petitioner supplied defective and inferior quality of Pet Bottles and Hope Buckets which damaged the product and thus the Corporate Debtor suffered financial loss of more than ₹ 30 lakhs. The Corporate Debtor claimed the Petitioner have refused to take back the excess quantities of Pet Bottles and Hope Buckets. The Corporate Debtor pointed out that in the month of April 2019 at the request of the Petitioner, they supplied goods amounting to ₹ 8,85,295/- to an associate company of the Petitioner namely Max Indo Private Limited and claimed that an entry to that effect to the ledger account statement on 26.04.2019 which establishes that the amount were paid to Max Indo Private Limited and Grow Max India Private Limited. The Corporate Debtor has not filed any proof of objection raised with regard to excess supply of quantities of Pet Bottles and Hope Buckets prior to the initiation of section 8 Demand Notice - It is undisputed fact that the Pet Bottles and Hope Buckets were delivered to the Corporate Debtor and the invoices raised remain unpaid. The Corporate Debtor has not demonstrated that any dispute with regard to excess supply of goods/inferior quality was raised prior to the issuance of demand notice. Hence, there is a clear liability of payment of amount due under the invoices and default of non-payment of such dues by the Corporate Debtor, Petition is admitted. Petition admitted - moratorium declared. Issues Involved:Company Petition under section 9 of the Insolvency & Bankruptcy Code, 2016 (IBC) for Corporate Insolvency Resolution Process (CIRP) initiation against a Corporate Debtor. Jurisdiction of the Tribunal. Dispute over outstanding dues for goods supplied. Allegations of excess supply and inferior quality of goods. Denial of liability by the Corporate Debtor. Admission of liability by the Corporate Debtor in prior communication. Legal validity of interest claim. Moratorium declaration and appointment of an interim resolution professional.Jurisdiction of the Tribunal:The Company Petition was filed under section 9 of the Insolvency & Bankruptcy Code, 2016, by an Operational Creditor against a Corporate Debtor. The Corporate Debtor is a limited company incorporated under the Companies Act, 1956, with jurisdiction falling under the Registrar of Companies (RoC), Maharashtra, Mumbai. The Tribunal established its jurisdiction to handle the petition based on the Corporate Debtor's registration details.Dispute over Outstanding Dues:The Operational Creditor claimed a sum of Rs. 26,50,927, including interest, as outstanding dues from the Corporate Debtor for goods supplied between January and February 2018. The Corporate Debtor allegedly failed to repay the dues despite multiple invoices issued by the Operational Creditor. The Operational Creditor sent a Demand Notice under the Insolvency & Bankruptcy Code, demanding repayment within 10 days, which the Corporate Debtor initially denied on vague grounds.Allegations of Excess Supply and Inferior Quality:The Corporate Debtor countered the claim by alleging that the Operational Creditor supplied excess quantities of goods against the purchase orders issued. They further accused the Operational Creditor of providing defective and inferior quality products, resulting in financial losses exceeding Rs. 30 lakhs. The Corporate Debtor claimed that the Operational Creditor refused to take back the excess goods and did not compensate for damages caused.Denial of Liability and Admission of Liability:The Corporate Debtor denied the liability, stating that no cause of action existed to invoke the Insolvency & Bankruptcy Code. They claimed that the petition was an abuse of process and lacked substance. However, the Corporate Debtor admitted the liability in prior communication, which the Operational Creditor argued showed no preexisting dispute. The Operational Creditor refuted the Corporate Debtor's claims of financial loss and inferior product quality.Legal Validity of Interest Claim and Moratorium Declaration:The Tribunal reviewed the pleadings and found that the Operational Creditor's claim for outstanding dues was valid. The Corporate Debtor failed to demonstrate any dispute regarding excess supply or inferior quality before the Demand Notice. Consequently, the Tribunal admitted the petition, declared a moratorium, and appointed an interim resolution professional to oversee the Corporate Insolvency Resolution Process.This comprehensive analysis covers the key issues involved in the legal judgment delivered by the National Company Law Tribunal, Mumbai Bench, regarding a Company Petition under the Insolvency & Bankruptcy Code, 2016, highlighting the jurisdiction, disputes over outstanding dues, allegations of excess supply and inferior quality, denial and admission of liability, interest claim validity, and the subsequent moratorium declaration with the appointment of an interim resolution professional.