2023 (11) TMI 830 - AT - Insolvency and Bankruptcy

NCLAT upholds CIRP initiation against corporate debtor for unpaid Rs. 10.18 crore tire cord fabric supply debt

NCLAT dismissed the appeal challenging initiation of CIRP against corporate debtor. The operational creditor had supplied tire cord fabric worth Rs. 10.18 ... Initiation of CIRP against the Corporate Debtor - default on the part of the Corporate Debtor or not - no reply to demand notice - existence of pre-existing dispute or not - HELD THAT:- It is clear that the Adjudicating Authority gave all possible opportunities to the Corporate Debtor to present his case but the Corporate Debtor miserably failed to do so. Therefore, the allegations on this account by the Appellant herein are not sustainable - the notice under section 8 (1) of Code was duly served by the Respondent No. 1 upon Corporate Debtor on 23.07.2021 and the Corporate Debtor did not reply to the demand notice. It is observed that the Operational Creditor raised 44 invoices for the supply of Tire Cord Fabric to the Corporate Debtor, during 2018-2019 arising out of work order dated 06.04.2018, which remained unpaid by the Corporate Debtor - It is noted that through E-mail dated 03.06.2020, the Corporator Debtor admitted the sum of Rs.10.18 Crore due and payable to Respondent No. 1 and also that through an E-mail dated 19.06.2020, the Corporate Debtor gave payment plan to the Respondent No. 1 which also failed. It is significant to observe that there is no record to show any pre-existing dispute - it is clear that there was established debts and defaults and the Adjudicating Authority passed the Impugned Order after analysing all facts and considering provisions of the Code and therefore we do not find any error in the Impugned Order. Appeal dismissed. Issues Involved:1. Validity of the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.2. Adequacy of opportunities provided to the Corporate Debtor to file a reply affidavit.3. Existence of pre-existing disputes regarding the debt claimed by the Operational Creditor.Summary:1. Validity of the initiation of CIRP against the Corporate Debtor:The appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 against the order dated 05.05.2022 passed by the National Company Law Tribunal, Kolkata Bench, initiating CIRP against the Corporate Debtor. The Respondent No. 1, an operational creditor, had filed an application under Section 9 of the IBC, 2016, which was admitted by the Adjudicating Authority, and the CIRP was initiated. The appellant, a shareholder of the Corporate Debtor, contended that the Adjudicating Authority wrongly passed the Impugned Order admitting the Corporate Debtor into CIRP before receiving no objection letters from the concerned stock exchanges.2. Adequacy of opportunities provided to the Corporate Debtor to file a reply affidavit:The Corporate Debtor was provided multiple opportunities to file its reply affidavit. The Adjudicating Authority noted that the Corporate Debtor was granted several adjournments but failed to file the reply affidavit, citing reasons such as labour unrest and lack of access to records. The Tribunal held that the Corporate Debtor made a casual attempt to seek further adjournments and that the reasons provided were insufficient. The Tribunal emphasized that the Insolvency and Bankruptcy Code aims to finalize insolvency proceedings in a time-bound manner, and repeated adjournments without basis could not be permitted.3. Existence of pre-existing disputes regarding the debt claimed by the Operational Creditor:The Respondent No. 1, engaged in the business of Tyre Cord Fabric, supplied goods to the Corporate Debtor based on work orders. Various invoices raised by the Respondent No. 1 remained unpaid, and the Corporate Debtor acknowledged its liability through emails dated 11 April 2020, 30 June 2020, and 19 June 2020, which included a payment plan that was not fulfilled. The Tribunal found no record of pre-existing disputes regarding the debt claimed by the Operational Creditor.Conclusion:The Tribunal concluded that the Adjudicating Authority gave all possible opportunities to the Corporate Debtor to present its case, but the Corporate Debtor failed to do so. The Tribunal observed that there were established debts and defaults, and the Adjudicating Authority passed the Impugned Order after analyzing all facts and considering provisions of the Code. Therefore, the appeal was dismissed, and the Impugned Order was upheld.