Corporate debtor's CIRP admission upheld under Section 9 IBC despite delivery and customs duty claims

NCLAT upheld NCLT's decision admitting corporate debtor into CIRP under Section 9 of IBC. Despite corporate debtor's claims that goods were delivered to separate entity and allegations of customs duty malpractices, tribunal found operational creditor presented compelling evidence including signed contracts, bills of lading, and confirmation letters. Corporate debtor failed to respond to demand notices within legal timeframe, indicating no pre-existing dispute. Connection between corporate debtor's director's son and third-party entity undermined debtor's claims. Allegations of customs duty evasion deemed separate matter requiring independent investigation. Appeal dismissed.

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Issues Involved:
1. Validity of the debt and liability of the Corporate Debtor.
2. Existence of a dispute regarding the debt.
3. Allegations of malpractices and customs duty evasion.

Summary:
1. Validity of the Debt and Liability of the Corporate Debtor:
The case involves an appeal u/s 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the admission of Section 9 proceedings by the Adjudicating Authority. The Operational Creditor, Nanjing Maohj Information & Technology Co. Ltd. (NMIT), supplied machineries to M/s Alliance Embroidery Machine Private Limited (Corporate Debtor) through Chirag Impex Limited. The Corporate Debtor did not fully pay for the goods, leading to an outstanding debt of approximately INR 5.59 crores. The Operational Creditor sent a demand notice to both Chirag Impex and the Corporate Debtor, but received no response, prompting the initiation of Section 9 proceedings.

The Corporate Debtor contended that the goods were supplied by Chirag Impex (HK) Ltd., not NMIT, and argued that the two entities are separate legal entities. However, the Adjudicating Authority noted that the Corporate Debtor and Chirag Impex (HK) Ltd. have familial ties and common directors, implying a deeper operational linkage. The Corporate Debtor's signed "Confirmation Letters of Quality and Payment" and Bills of Lading listing NMIT as the shipper and the Corporate Debtor as the recipient of the machines further supported the Operational Creditor's claim.

2. Existence of a Dispute Regarding the Debt:
The Corporate Debtor argued that there was a pre-existing dispute, citing the lack of specific Bills of Entry and alleging that the Operational Creditor routed different machineries through Chirag Impex (HK) Ltd. The Appellant relied on landmark judgments like Mobilox Innovations Pvt. Ltd Vs. Kirusa Software Pvt. Ltd. and S S Engineers Vs Hindustan Petroleum Corporation Ltd. to argue that the debt was disputed and the CIRP petition should be dismissed. However, the Tribunal found that the so-called dispute was not pre-existing and was based on remarks by the Adjudicating Authority regarding customs duty evasion, which did not constitute a genuine dispute under IBC.

3. Allegations of Malpractices and Customs Duty Evasion:
The Corporate Debtor alleged malpractices, including customs duty evasion and under-invoicing, and argued that these issues required investigation rather than admission under IBC. The Adjudicating Authority acknowledged these allegations but noted that they did not negate the Operational Creditor's claim. The Tribunal held that such issues should be investigated separately through appropriate legal channels and did not affect the validity of the debt.

Conclusion:
The Tribunal upheld the Adjudicating Authority's order to admit the Corporate Debtor into the Corporate Insolvency Resolution Process (CIRP) and dismissed the appeal. The evidence overwhelmingly supported the Operational Creditor's claim for repayment, and the Corporate Debtor had a clear legal obligation to fulfill their financial commitments as outlined in the signed contracts and documented transactions. No orders as to costs were passed.

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