Tribunal Admits Insolvency Petition Against Corporate Debtor: Moratorium Imposed & IRP Appointed

The Tribunal admitted the petition under Section 9 of the Insolvency and Bankruptcy Code against the Corporate Debtor, declaring a moratorium and appointing an Interim Resolution Professional. The Tribunal found the Operational Creditor demonstrated the existence of an outstanding debt and default, rejecting the Corporate Debtor's claims of pre-existing disputes. The Corporate Debtor's solvency did not prevent the initiation of Corporate Insolvency Resolution Process, emphasizing that the IBC aims at resolving insolvency, not disputed claims. The IRP was directed to convene a meeting of the Committee of Creditors and submit a resolution plan within 105 days.

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Issues Involved:
1. Existence of debt and default.
2. Pre-existing disputes regarding quality, quantity, and price of goods supplied.
3. Solvency of the Corporate Debtor.
4. Appropriateness of initiating Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Existence of Debt and Default:
The Operational Creditor, M/s Geo Source, supplied goods to the Corporate Debtor, M/s Phular Construction Co. (Pvt.) Ltd., against various purchase orders. Six tax invoices amounting to Rs. 38,14,200/- were raised, out of which Rs. 34,90,318/- remained unpaid after adjustments. Despite repeated demands, the Corporate Debtor failed to clear the outstanding amount, leading to the filing of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016.

2. Pre-existing Disputes:
The Corporate Debtor contended that there were pre-existing disputes regarding the quality, quantity, and price of the goods supplied. However, the Tribunal found that these disputes were not raised at the time of delivery or soon thereafter. The Corporate Debtor's claims of disputes were considered frivolous as they were raised only after the demand notice under Section 8 of the Code was served. The Tribunal noted that previous complaints or disputes, which were settled, cannot be used to contest future transactions.

3. Solvency of the Corporate Debtor:
The Corporate Debtor argued that it is a solvent and profitable company, citing its financial performance over the preceding three years. However, the Tribunal emphasized that solvency alone does not preclude the initiation of CIRP if there is a default in payment of an operational debt. The Tribunal referred to legal precedents asserting that the IBC is not a forum for recovery of disputed claims but for resolution of insolvency.

4. Appropriateness of Initiating CIRP:
The Tribunal concluded that the Corporate Debtor failed to prove any pre-existing dispute that would prevent the initiation of CIRP. The Operational Creditor successfully demonstrated the existence of an outstanding debt and default. Consequently, the Tribunal admitted the petition for initiating CIRP against the Corporate Debtor.

Orders:
i) The application under Section 9 of the IBC for initiating CIRP against the Corporate Debtor was admitted.
ii) A moratorium was declared in accordance with Sections 13 and 15 of the IBC.
iii) The moratorium prohibits the institution or continuation of suits, transferring or disposing of assets, and recovery actions against the Corporate Debtor.
iv) Essential goods or services to the Corporate Debtor shall not be terminated during the moratorium.
v) Mr. Rajesh Kumar Agrawal was appointed as the Interim Resolution Professional (IRP).
vi) The IRP was directed to convene a meeting of the Committee of Creditors and submit a resolution plan within 105 days.
vii) The Operational Creditor was directed to deposit Rs. 2,00,000/- with the IRP for preliminary expenses and fees.
viii) The Registry was directed to communicate the order to all concerned parties and list the matter for filing of the Progress Report on 22/08/2022.

The order was signed on the 5th day of July, 2022.

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