Dhatu International PTE Limited vs M/s. Ferrosco Industries Private Limited

Per: Justice (Retd.) S.RAMATHILAGAM, MEMBER (JUDICIAL)

Under Adjudication is an Application that has been filed by M/s. Dhatu International PTE Limited (hereinafter referred to as 'Operational Creditor') under Section 9 of the Insolvency & Bankruptcy Code 2016 (in short, 'IBC,2016') r/w Rule 6 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 against M/s. Ferrosco Industries Private Limited (hereinafter referred to as 'Corporate Debtor'), to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor, declare moratorium and appoint Interim Resolution Professional.

Part-I of the Application sets out about the Operational Creditor from which, it is evident that the Operational Creditor is a company registered in Singapore having Registration No:200502960R. Part-II of the Application gives all the particulars of the Corporate Debtor from which it is evident that the Corporate Debtor is a Private Limited Company with CIN: U37100TZ2017PTC028360 which was incorporated on 11.01.2017 and the Registered Office of the Corporate Debtor as per the Application is stated to be situated at SF No.191/3A,B, Kurichi (VGE) New Town, LIC Colony, SIDCO (PO) Coimbatore, Tamil Nadu - 641021. From Part III of the application, it is seen that the Operational Creditor has not proposed the name of the "Interim Resolution Professional" and left it to the discretion of this Tribunal to appoint the same.

From Part-IV of the Application, it is seen that a sum of Rs.1,01,62,118.50/- (Rupees One Crore One Lakh Sixty Two Thousand One Hundred Eighteen only) including interest, is being claimed by the Operational Creditor as the Operational debt. The debt stated to have fallen due on the dates when the Corporate Debtor failed to make payments in terms of seller's contract dated 06.06.2019. Part – V of the Application discloses about the details of the documents which have been filed by the Operational Creditor in order to prove the 'Operational debt', which are as follows;

The Learned Counsel for the Operational Creditor submitted that the Operational Creditor is engaged in trading scrap and semi-finished metal products. It was submitted that in the course of its business, the Operational Creditor and Corporate Debtor entered into a seller's contract dated 06.06.2019 ("Contract"). Under the terms of the said contract, the Corporate Debtor was to pay 10% of the value of the shipment within 5 days of entering into the said contract and the balance 90% was to be paid immediately upon arrival of container at the final destination, i.e., Tuticorin. Further, the Corporate Debtor was liable to pay Detention and Demurrage charges if the balance payment was not received by the Operational Creditor within 14 days of the arrival of the container at Tuticorin. A copy of the Seller's Contract dated June 6, 2019 is enclosed as Annexure II (1) along with the application.

Ld. Counsel for the Operational Creditor further submitted that heavy melting scrap was shipped to the Corporate Debtor in terms of the said contract and the consignment duly reached Tuticorin. Thereafter, Operational Creditor raised two Commercial Invoices dated June 19, 2019 and July 3, 2019 for an amount of USD 15,036.50 (Rs. 11,21,873.26/-) and USD 88,132.80 (Rs. 65,75,588.20/-) respectively on the Corporate Debtor. Copy of the Commercial Invoices raised by the Operational Creditor on the Corporate Debtor is enclosed as Annexure II (2).

It is further averred in the application that the Corporate Debtor failed to clear the goods shipped by the Operational Creditor. On account of this, APL Limited, the shipping company, wrote several emails to the Corporate Debtor requesting them to clear the goods at the earliest. APL Limited also raised demands for detention and demurrage charges due to the delay in clearing the goods. However, the Corporate Debtor failed to clear the goods and pay the detention and demurrage charges.

Despite numerous requests from APL Limited, the Corporate Debtor failed to clear the goods for nearly a year and the detention and demurrage charges kept mounting. In order to avoid any further escalation of the detention and demurrage charges, the Operational Creditor entered into negotiations with APL Limited and paid an amount of USD 20,000 (Rs. 14,92,200/-) towards Detention and Demurrage charges to APL Limited on 30th June, 2020. The said amount is liable to be recovered in full from the Corporate Debtor in terms of the said contract. A copy of the Invoice dated June 25, 2020 evidencing the payment of Detention and Demurrage charges by the Operational Creditor is enclosed herewith as Annexure – II (4).

It is averred in the application that the Operational Creditor has been continuously following up with the Corporate Debtor demanding the outstanding payment through numerous emails and calls. However, the Operational Creditor has neither received payment nor any response from the Corporate Debtor with regard to the outstanding amount. Thereafter, the Operational Creditor had issued a Demand Notice as stipulated under Section 8 of IBC, 2016 to the Corporate Debtor on 16.09.2020.

It is further averred in the application that in response to the demand notice the Corporate Debtor had sent a reply on 23.10.2020 which is placed as annexure II (6) along with the application. It submitted that there is neither a pre-existing dispute nor paid the outstanding amount to the Operational Creditor and hence it was submitted that the Operational Creditor has moved the present Application before this Tribunal seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor.

The Corporate Debtor has filed counter, written submissions and also submitted additional documents. The Learned Counsel for the Corporate Debtor submitted that the applicant is not an "Operational Creditor" as defined under Section 5 (20) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code"), as the alleged debt is not an "Operational Debt" in view of the fact that the Invoices dated 19.06.2019 and 03.07.2019 relied upon by the applicant were not accepted by the Corporate Debtor. The invoices are raised in violation of main Seller's Contract dated 06.06.2019.

The Learned Counsel further submitted that the Seller's Contract provides that the shipment ought to have been dispatched only on receipt of the advance payment of 10% of the invoice amount. Hence the shipment sent in violation of the Seller's Contract cannot confer any right of claim upon the Applicant.

Further, it is averred in the counter that by taking advantage of all the communications between the Corporate Debtor and the shipper, the Applicant presumes existence of a contract on the said two invoices and hence contended that the present application is liable to be dismissed.

To this, the Applicant filed a rejoinder and denied all the allegations raised by the Corporate Debtor in the counter.

Heard the submissions made by the Ld. Counsel for the parties. From the submissions made by both the parties, it is seen that the following issues are required to be decided by this Tribunal;

As regards to issue No. (i), it is important to refer to Section 5(20) and 5(21) of the Code which defines an Operational Creditor and Operational Debt as follows:-

Further, the Hon'ble Supreme Court while interpreting the above definitions in the case of Swiss Ribbons Pvt. Ltd. & anr. v. Union of India (Writ Petition (Civil) No. 99 of 2018, dated 25.01.2019 has held that "Operational Creditors are relatable to supply of goods and services in the operation of business". Thus, it is manifestly clear that the Applicant had supplied goods to the Corporate Debtor in terms of the Seller's Contract and therefore, the Applicant is an Operational Creditor and the debt owed to it is an Operational Debt.

As regards issue No. (ii) is concerned, on perusal of the counter filed by the Corporate Debtor, it is seen that the Corporate Debtor, throughout the averments made in the counter, seems to have only alleged that there exists a dispute between the parties. Further as per the contention of the Corporate Debtor, if the shipment was dispatched by the Applicant in violation to the seller's contract, the Corporate Debtor ought to have atleast raised the objection at the point in time when the shipping company had sent a mail to the Corporate Debtor to clear the consignment. However, no documentary evidence or proof has been filed by the Corporate Debtor to show that it had objected to the shipment. Further, from the various mail's exchanged between the shipping company the Corporate Debtor as filed along with the application one such mail is reproduced below:

It is evident from the above mail sent by the Corporate Debtor that it had agreed to take delivery of the materials which makes it clear that the Corporate Debtor has accepted the shipment itself and all the allegations seem to be only a moonshine defence raised by the Corporate Debtor in order to defeat the claim of the Operational Creditor. Further, the Operational Creditor has also filed an Affidavit under Section 9(3)(b) of IBC, 2016 wherein it has been stated that the Demand Notice has been served. Further in relation to the 'Pecuniary Jurisdiction' the total amount claimed to be defaulted exceeds Rs. 1 crore and as such this Tribunal has the 'Pecuniary Jurisdiction' to entertain this Petition, as filed by the Operational Creditor.

Thus, taking into consideration the facts and circumstances of the case as well as the position of Law, we are of the view that the Petition, as filed by the Operational Creditor, is required to be admitted under Section 9(5) of the IBC, 2016. Since the Operational Creditor has not named the Insolvency Resolution Professional, this Tribunal based on the latest list furnished by Insolvency and Bankruptcy Board of India applicable for the period between January 2022 - June 2022 appoints Ms. Chitra Perinkulam Ragavan, Reg. No. IBBI/IPA-002/IP-N00720/2019-2020/12558 (email id:- [email protected] ) as the "Interim Resolution Professional" subject to the condition that no disciplinary proceedings are pending against such an Interim Resolution Professional named and disclosures as required under IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 are made within a period of one week from the date of this order. The IRP appointed shall take in this regard such other and further steps as are required under the Statute, more specifically in terms of Section 15,17,18 of the Code and file his report within 20 days before this Bench. The powers of the Board of Directors of the Corporate Debtor shall stand superseded as a consequence of the initiation of the CIRP in relation to the Corporate Debtor in terms of the provisions of IBC, 2016.

As a consequence of the Application being admitted in terms of Section 9 (5) of the Code, the moratorium as envisaged under the provisions of Section 14(1) and as extracted hereunder shall follow in relation to the Corporate Debtor:

However, during the pendency of the moratorium period in terms of Section 14(2) (2A) and 14(3) as extracted hereunder:

The duration of the period of moratorium shall be as provided in Section 14(4) of the Code and for ready reference reproduced as follows:

The Operational Creditor is directed to pay a sum of Rs.1,00,000/-(Rupees One Lakh Only) to the Interim Resolution Professional upon the Interim Resolution Professional filing the necessary declaration form as required under the provisions of the Code to meet out the expenses to perform the functions assigned to her in accordance to Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Based on the above terms, the Application stands admitted in terms of Section 9(5) of IBC, 2016 and the moratorium shall come in to effect as of this date. A copy of the Order shall be communicated to the Operational Creditor as well as to the Corporate Debtor above named by the Registry. In addition, a copy of the Order shall also be forwarded to IBBI for its records. Further, the Interim Resolution Professional above named who is figuring in the list of Resolution Professionals forwarded by IBBI be also furnished with copy of this Order forthwith by the Registry, who will also communicate the initiation of the CIRP in relation to the Corporate Debtor to the Registrar of Companies concerned.