Elan Professional Appliances Pvt. Ltd. vs Himalayan Equipment Manufacturing Co. Private Ltd.

It is contended by the Corporate Debtor that trading or commercial transaction between the Applicant and the Respondent was initiated in the year 2017 by placing an order for supply of kitchen appliances of Rs. 1.30 crores. The payment of the said order was timely made as per the invoices raised by the Operational Creditor, which is evident from the ledge account of FY 01.04.2017-15.03.2018 and 01.04.2018-31.03.2019 annexed as Annexure No.1 with the Reply. It is pointed out by the Corporate Debtor that the dispute between the parties arose from the last invoice raised by the Operational Creditor.

It is also contended by the Respondent/Corporate Debtor that the Operational Creditor supplied defective and poor quality of goods which didn’t pertain to the description of the goods as agreed between parties prior to execution of sale. Due to defective quality of goods supplied, the Corporate Debtor received many complaints regarding the equipments and appliances and accordingly, sought technical assistance from the Operational Creditor which was not provided which is evident from the email dated 22.05.2019. Copy of Email dated 22.05.2019 has been annexed as Annexure No.2 with the Counter Reply.

Failure to redress the complaint regarding the defective quality of good can also be seen from the email dated 28.305.2019 wherein the Respondent raised the complaint regarding ICE CUBE MACHINE (Elanpro EIM61BW) (M61BW180100042) found to be defective and several complaints were received after installation. These complaints were never addressed by the Operational Creditor even after the reminder vide an email dated 17.06.2019. Copy of Email dated 28.05.2019 and 17.06.2019 has been annexed as Annexure No.3 with the Counter Reply.

It is further contended by the Respondent that notice of dispute dated 04.07.2019 was raised in response to the demand notice. Copy of notice of dispute dated 04.07.2019 has been annexed as Annexure No. 4 with the Counter Reply.

The Respondent has raised several critical issues during the course of the business dealings with the Operational Creditor. These issues pertain to the Operational Creditor's failure to address defective items and equipment making repeated requests for repair or replacement. Furthermore, there is a matter of excess material supplied by the Operational Creditor that remains uncollected, amounting to a total worth of Rs. 6 Lakhs. Copy of list of surplus materials supplied has been annexed as Annexure No.5 with the Counter Reply.

Furthermore, the Respondent contends that despite numerous reminders and even personal visits to the Lucknow office of the Operational Creditor, it has failed to retrieve its surplus stock as promised.

It is contended by the Corporate Debtor that the payment was withheld due to failure of the Operational Creditor to provide the correct quantity of items as per the purchase order, as well as their inability to address the issues relating to the defective items promptly. It is alleged by the Corporate Debtor that it appears that the Operational Creditor might have been attempting to clear their dead stock by raising invoices to its dealers without proper purchase orders in place. Therefore, it is further alleged by the Corporate Debtor that the Operational Creditor sent excessive items, not required for its operations, while also omitting items that were clearly specified in the purchase list. Furthermore, the quality of the goods supplied was subpar and defective, a matter which was communicated to the Operational Creditor well before the issuance of the demand notice. As per the reply submitted by the Corporate Debtor, the pre-existing dispute as mentioned in its reply has been concealed by the Operational Creditor in their petition before this authority.

It is contended by the Operational Creditor that Corporate Debtor has duly confirmed the balance of the operational debt of Rs.19,24,386/- as mentioned in account statement as on 31.03.2019 .Copy of Confirmation of Account as on 31.03.2019 has been annexed as Annexure RA-1 and RA-2 with the Rejoinder.

With respect to allegation of excess materials supplied, It is contended by the Operational Creditor that materials were supplied as per the purchase order dated 24.11.2018 and 26.12.2018 issued by the Corporate Debtor. Mr. Vishal Singh, Managing Director of the Corporate Debtor vide an email dated 11.12.2018 placed a request order for the supply of additional materials while acknowledging the materials supplied. Copy of Purchase orders dated 24.11.2018 and 26.12.2018 and email dated 11.12.2018 have been annexed as Annexure RA3 and RA4 with the Rejoinder.

With regard to the allegation of complaints raised by the Corporate Debtor regarding supply of defective materials, it is contended by the Operational Creditor that such complaints were raised after 06 months from the date of supply of materials and only two complaints were registered out of 50 items sold and these two complaints were duly redressed to the satisfaction of the customers. Copies of Service Reports of these two complaints have been annexed as Annexure-RA5 with the Rejoinder. The Corporate Debtor has already made payment of Rs.11,00,000 (Rupees Eleven Lakhs Only) against the invoices raised of Rs.9,65,609, Rs.7,53,878/- , Rs.8,18,232/- and Rs.4,86,667 constituting a sum of Rs.30,24,386/- and has duly availed GST input credit. The Operational Creditor in support of his averments has placed reliance on the judgment passed by the Hon’ble Supreme Court in Civil Appeal No. 9405 of 2017 titled as Mobilox Innovations Private Limited vs Kirusha Software Private Limited. It is contended that it is well settled that once the Debt is admitted, a Corporate Debtor cannot wriggle out its liability which is rightfully owed to the Operational Creditor by raising a sham of dispute regarding deficiency of proper services or the functioning or quantity of the goods supplied. It is also emphasised that the Corporate Debtor has accepted its liability to the principal amount of Rs.19,24,386/- in the Account Statement annexed in RA-2 of the rejoinder.

In view of the submissions made by the Operational Creditor in the rejoinder as discussed above, it is pleaded that the submissions of the Respondent/Corporate Debtor as to excess quantity, service etc. is out of place , unsubstantiated , incorrect and ought to be rejected and the present petition u/s 9 of the Code, 2016 may be allowed.

The application filed by the Operational Creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016 for initiating the Corporate Insolvency Resolution Process against the Corporate Debtor i.e. Himlayan Equipment Manufacturing Company Private Limited is hereby admitted.

We hereby declare a moratorium u/s 14 and public announcement in accordance with Sections 13 and 15 of the I & B Code, 2016.

This Adjudicating Authority hereby appoints Mr. Rakesh Jindal as IRP as discussed in para 17 above.

The IRP shall cause a public announcement of the initiation of the Corporate Insolvency Resolution Process and call for the submission of claims under Section 15. The public announcement referred to in clause (b) of sub-section (1) of Section 15 of the Insolvency & Bankruptcy Code, 2016 shall be made immediately.

Moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 prohibits the following: -

The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;

Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);

The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor.

The supply of essential goods or services rendered to the Corporate Debtor as may be specified shall not be terminated, suspended, or interrupted during the moratorium period.

The provisions of sub-section (1) of Section 14 of the Code, 2016 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.

The IRP shall after collation of all the claims received against the Corporate Debtor and the determination of the financial position of the Corporate Debtor constitute a Committee of Creditors and shall file a report certifying the constitution of the Committee to this Tribunal on or before the expiry of thirty days from the date of his appointment, and shall convene the first meeting of the Committee within seven days of filing the report of Constitution of the Committee.

The Committee of the Creditors shall appoint a Resolution Professional as per section 22 of I & B Code, 2016. A monthly progress report shall be filled by the Resolution Professional providing the details of work done in respect of completing the CIRP within the time line as prescribed under the provision of section 12 of the Code, 2016.

The order of moratorium shall have effect from the date of admission till the completion of the Corporate Insolvency Resolution process.

However, at any time during the Corporate Insolvency Resolution Process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of the Corporate Debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.

The Interim Resolution Professional should convene a meeting of the Committee of Creditors and submit the resolution passed by the Committee of Creditors and shall identify the prospective Resolution Applicant in accordance with the Code, 2016 read with the relevant rules & regulation framed thereunder.

The Operational Creditor/Applicant is directed to deposit Rs.1,00,000/- with the IRP appointed hereinabove within two weeks from this order. IRP can claim the preliminary expenses and fees subject to approval by the CoC and after the constitution of the CoC.