Apavarga Trading Company vs J. S. Hospitality Services Private Limited

Per Dr. V. K. Subburaj (Member Technical)

This is an application filed by the partnership firm Apavarga Trading Company through its partner Sh. Moti Kumar ("Applicant") invoking Section 9 of Insolvency and Bankruptcy Code, 2016 ("the Code") against J. S. Hospitality Services Pvt. Ltd. ("Respondent") for initiating Corporate Insolvency Resolution Process ("CIRP") of the Respondent for a claim of Rs.35,14,917/-.

The Applicant has averred as follows:

a. The Applicant is a partnership firm duly registered under the partnership Act, 1932 and engaged in the business of trading and import of kiriyana goods etc. and other eatable items on institutional supplier, wholesale and retail basis and marketing of the same throughout India.

b. The Respondent is engaged in the business of hospitality services and running number f chain of restaurants under the name and style of Pind Balluchi at different unit in Connaught Place, Lajpat Nagar, Rohini, Saket and Nehru Place.

c. The Respondent approached the Applicant to supply groceries etc to the Respondent as the Applicant had been supplying the same to the sister concerns of the Respondent. The Applicant supplying the groceries etc to the Respondent as per the order placed.

d. The Applicant had been maintaining a running account for the Respondent and till date the Respondent is liable to pay a sum of Rs.35,14,917/-.

e. The Respondent was aware that upon receipt of the said goods, it was liable to make total payment in respect of the concerned invoices and if unpaid, interest at the rate of 18% p.a. was applicable on the amount payable.

f. Despite repeated follow ups the Respondent failed to discharge its liability. The Applicant has paid the sales tax in respect of all the tax invoices issued to the Respondent.

g. The Applicant then sent a demand notice under Section 8 of the Code. No payment was received within 10 days from the date of the notice. The Respondent sent a reply to the notice denying the liability and raising disputes regarding the products supplied for the first time.

The Respondent has contended as follows in its reply:

a. The Applicant has claimed Rs.35,14,917/- in the application whereas the actual amount due and payable by the Respondent to the Applicant is Rs.9,37,943/-, for which the Respondent had issued a cheque to the Applicant which was returned by the Applicant.

b. The Applicant has placed on record invoices which have been fabricated to inflate the debt due from the Respondent. Fabrication of the invoices is substantiated by the fact that the Applicant has failed to adduce any evidence for supply of material, whereas in the normal course business the Respondent always acknowledged the receipt of goods.

c. The debt is also disputed due to the debit notes issued from time to time as is evident from the statement of account duly certified by the chartered accountant of the Respondent along with reconciliation of account reconciling with ledger account filed by the Applicant.

We have perused the pleadings of the parties. The Respondent claims that the Applicant is demanding an inflated amount with the help of certain fabricated invoices. However, the allegedly fabricated invoices were emailed to the Respondent by the Applicant around the time of their issuance and no objection was raised by the Respondent regarding the same. In fact, the Respondent has been unable to produce any document or communication which shows that it had objected to the allegedly forged invoices any time before the issuance of the Section 8 demand notice. Further, it is also surprising that the Respondent continued to carry on business with the Applicant without any objections, even when the goods supplied by the Applicant were of sub-standard quality or delayed, as claimed by the Respondent. Again, the Respondent has failed to show that it had ever objected to the supply by the Applicant on such grounds. Thus, there is nothing to show that there is a pre-existing dispute.

The Respondent has also stated that certain debit notes were issued in the Respondent's favour but has failed to produce the said notes or any other document which may show that the Applicant consented to such debit in the Respondent's favour. The Respondent has only placed on record its own ledger account to show the debits but that cannot be taken as sufficient proof to conclude that debit was in fact granted to the Respondent by the Applicant.

The Applicant has established the default on the basis of the documents filed by it. The Respondent's reply to the Section 8 notice and the present application is a sham to escape the consequences of the present proceedings. Thus, since the Respondent has defaulted on payment of the debt, the present application is admitted.

A moratorium in terms of Section 14 of the Code is imposed forthwith in following terms:

The interim resolution professional ("IRP") named in the list provided by the Insolvency and Bankruptcy Board of India is Mr. Saumya Kumar Singh (email id: [email protected], ph. no.: 9110162092) and is being confirmed by this Bench. He shall take such other and further steps as are required under the statute, more specifically in terms of Section 15, 17 and 18 of the Code and file his report within 30 days before this Bench.

Renotify this case for report of the IRP on 24.09.2019.