Drip Capital Inc. vs Shivani Trendz Private Limited

Per: Shyam Babu Gautam, Member (Technical)

This is a Company Petition filed under section 7 (“the Petition”) of the Insolvency and Bankruptcy Code, 2016 (IBC) by Drip Capital India LLP ("the Financial Creditors"), seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Shivani Trendz Private Limited ("the Corporate Debtor").

The Corporate Debtor is a Private company limited by shares and incorporated on 06.08.2012 under the Companies Act, 1956, with the Registrar of Companies, Maharashtra, Mumbai. Its Corporate Identity Number (CIN) is U17222MH2012PTC263871. Its registered office is at 114, 11^th Floor, Hubtown Viva, Shankar Wadi, Jogeshwari (East), Mumbai – 400060. Therefore, this Bench has jurisdiction to deal with this petition.

In or around 8^th October 2018, the Corporate Debtor, as an exporter of textile related items in India, approached the Applicant being in the business of trade finance for availing a trade finance facility including factoring/ Invoice discounting facility. Based on the representations made by the Corporate Debtor, the Applicant executed a Receivable Purchase Factoring Agreement (hereinafter referred to as the “Agreement”) inter alia sanctioning a Receivables Purchase Facility with a limit of USD 1,000,000 on the terms and Conditions as set out therein. In order to secure the repayment of the facility amount along with all Fees, charges, interest, overdue interest, factoring commission accrued thereon, the Corporate Debtor issued Post Date Cheques along with an Undated Cheque Undertaking dated 10^th December 2018 and an Irrevocable undertaking dated 10^th December 2018 towards any unpaid disputed Receivables in favor of the Applicant.

Accordingly, as per the terms of the Agreement, the Corporate Debtor appointed the Applicant to act as their Factor and assigned and sold Commercial Invoice (hereinafter referred to as “Purchased Receivable”) pertaining to Kothari General Trading L.L.C (hereinafter referred to as the “Buyer”) with regard to consignment of certain products on the terms and conditions stipulated in the Agreement.

The side Purchased Receivable clearly stipulated that the same was sold and assigned to the Applicant, with a request to the Buyer to route all remittance directly to the Applicant’s bank account. Consequently, at the request of the Corporate Debtor, the applicant disbursed a total sum of USD 1,00,000 towards Purchase Price of the Purchased Receivable. As the outstanding Receivable were overdue and unpaid by the Buyer on the Due Date resulting into occurrence of Remedy Event as per the Agreement read with Irrevocable Undertaking dated 10^th December 2018 for exercising recourse on the Corporate Debtor towards repayment of the unpaid overdue aggregate outstanding Receivables, the Applicant issued a Demand Notice dated 8^th November 2019, calling upon the Corporate Debtor to immediately make payment towards the aggregate outstanding days from the said Notice.

However, the corporate Debtor failed to make payment of the Aforesaid amount i.e. USD1,08,425.46.

Receivable Purchase Facility was sanctioned to Corporate Debtor with Limit of USD 1,000,000 (One Million Dollar). Date of Disbursement: 9^th January 2019.

As on 30^th November 2019, the total amount of default is Rs. 78,20,677.01. Date of default is 8^th November 2019. The Computation of Claim Amount has been annexed herewith at “Annexure – D”.

Details of Acknowledgement:

a. Irrevocable Undertaking dated 10^th December 2018 issued by the Corporate Debtor in favor of the Applicant inter alia irrevocably undertaking to repay (without any dispute or demure) the entire amount advanced by the applicant along with all fees and charges including interest overdue interest, factoring commission to the Applicant or their duly appointed Collection and Process Agent i.e. Drip Capital Services India LLP, upon the occurrence of any remedy event, any Commercial Dispute or Fraud, in any manner whatsoever. Further undertaking that the Applicant shall have full recourse on the Corporate Debtor and that the latter shall repay that amount due and payable under the Agreement not later than 3 Business Days of having received the demand under the Remedy Event Notice from the Applicant is annexed herewith as annexure E.

b. Demand Promissory Note dated 10^th December 2018 issued by the Corporate Debtor in favor of the Applicant inter alia irrevocably and unconditionally undertaking and promising to pay the Applicant on demand the amount of USD 1000000 or rupee equivalent thereof together with interest from the date such demand (at the interest rate contractually agreed upon between the parties) is annexed herewith as Annexure F.

c. Undated Cheque Undertaking dated 10^th December 2018 along with Post-dated Cheques (“PDCs”) issued by the Corporate Debtor in favor of the Collection and Process agent viz. Drip Capital Services India LLP (hereinafter referred to as “Collection and Process Agent”) of the Applicant towards the repayment of the principal amount of the Facility along with all fees, charges, interest, overdue interest, factoring commission accrued thereon and inter alia authorizing the Collection and Process Agent of the Applicant to rely on the said Undertaking while dealing with or taking action related to the PDCs is annexed herewith as Annexure G.

The Financial Creditor in furtherance of his claim annexed following documents:

Mr. Ajay Bhaootra, Ex- Director, appeared from the side of the Corporate Debtor on the date of final hearing of this Petition. Submitted that the Corporate Debtor had not filed any formal reply in this matter.

This matter was listed on several occasions for hearing it is observed that since inception opportunities were given to the Respondent to file formal reply, but Respondent chose not to file reply. Therefore, the opportunity to file reply was forfeited on account of non-filing.

We have heard the arguments of Financial creditor and Corporate Debtor and perused the records.

It is noted from the records and submissions from counsel that the Corporate Debtor has availed the Receivable Purchase Factoring Agreement dated 10/12/2018. There is no dispute regarding the Corporate Debtor having availed the Receivable Purchase Factoring at the rate of interest mentioned in Agreement from the Financial Creditor. The Corporate Debtor issued cheques in favor of the Financial Creditor to repay the debt. The Financial Creditor issued notice dated 8/11/2018 for repayment of debt but same was not honoured. These submissions establish the existence of debt and default.

We also consider the facts of the case in the lights of the Hon’ble Supreme Court in Swiss Ribbons Pvt. Ltd. & Ors. Vs. Union of India & Ors. [Writ Petition (Civil) No. 99 of 2018] upholding the Constitutional validity of IBC, the position is very clear that unlike Section 9, there is no scope of raising a ‘dispute’ as far as Section 7 petition is concerned. As soon as a ‘debt’ and ‘default’ is proved, the adjudicating authority is bound to admit the petition.

The Financial Creditor has proposed the name of Mr. Gaurav Ashok Adukia, Registration No. IBBI/IPA-002/IP-N00457/2017-2018/11293, as the Interim Resolution Professional of the Corporate Debtor. He has filed his written communication in Form 2 as required under rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 along with a copy of his Certificate of Registration.

The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount stipulated under section 4(1) of the IBC. Therefore, the debt and default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor.

It is, accordingly, hereby ordered as follows: -