Tribunal Admits Application Under Section 9: CIRP Initiated

The Tribunal admitted the application filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code. A moratorium was declared, and the Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor. An Interim Resolution Professional (IRP) was appointed, and the management of the Corporate Debtor was entrusted to the IRP. The Operational Creditor was directed to deposit Rs. 2,00,000 with the IRP for expenses. The case was scheduled for a periodical report filing on 18.10.2022.

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Issues Involved:
1. Pre-existing disputes between the parties.
2. Validity of the demand notice.
3. Right to claim damages by the Corporate Debtor.
4. Admissibility of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

Pre-existing Disputes:
The Corporate Debtor argued that there were pre-existing disputes regarding the quality of the product supplied, which were raised before the demand notice was issued. The disputes pertain to two specific invoices for the weedicide 'Aster,' which allegedly caused damage to the tea bushes. The Corporate Debtor claimed that these disputes necessitate adjudication in a civil suit, citing the case of M+R Logistics (India) Private Limited vs. AGA Publications Limited and Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. However, the Tribunal found that the Operational Creditor's claim in the petition did not include these disputed invoices, but rather nine other invoices which were not contested by the Corporate Debtor. Therefore, the defense of pre-existing disputes was deemed untenable for the nine invoices in question.

Validity of the Demand Notice:
The Corporate Debtor contended that the demand notice was undated and thus invalid. The Tribunal referred to Rule 5 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules, 2016, and Section 8 of the Code, which require that a demand notice be delivered to the Corporate Debtor. In this case, the demand notice was received and acknowledged by the Corporate Debtor, fulfilling its purpose. Therefore, the demand notice was considered valid.

Right to Claim Damages:
The Corporate Debtor claimed it had incurred losses worth over Rs. 4 crores due to the defective weedicide and had filed a civil suit for damages. The Tribunal referred to the Union of India (UOI) vs. Raman Iron Foundry and Ors. and Organon (India) Private Limited vs. Martin and Harris Private Limited cases, which established that a claim for unliquidated damages does not constitute a debt until adjudicated by a court. Thus, the Corporate Debtor's claim for damages could not be used to set off the debt owed to the Operational Creditor under the nine undisputed invoices.

Admissibility of the Petition:
The Tribunal found that the petition by the Operational Creditor was complete in all respects as required by law. The Corporate Debtor was in default of a debt due and payable, which was more than the minimum amount stipulated under Section 4(1) of the Code. Consequently, the petition was admitted, and the Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor.

Order:
1. The application filed by the Operational Creditor under Section 9 of the Code was admitted.
2. A moratorium under Section 14 of the IBC was declared.
3. Public announcement of the CIRP was ordered.
4. An Interim Resolution Professional (IRP) was appointed to carry out the functions as per the Code.
5. The management of the Corporate Debtor was vested in the IRP during the CIRP period.
6. The Operational Creditor was directed to deposit Rs. 2,00,000 with the IRP for expenses.
7. The Court Officer was directed to communicate the order to all relevant parties.
8. The Operational Creditor was to serve a copy of the order to the IRP and the Registrar of Companies, West Bengal, Kolkata.
9. The case was set to come up on 18.10.2022 for filing the periodical report.

Signed on the 5th day of September, 2022.

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