HJM Fuels Pvt. Ltd vs Shambhu Textiles Mills Pvt. Ltd

[Per: Mr. Prasanta Kumar Mohanty, Member (T)]

The present petition has been preferred by the Operational Creditor, HJM Fuels Pvt Ltd. under Section 9 of the Insolvency and Bankruptcy Code, 2016 (herein after referred to as a "Code") seeking for initiation of Corporate Insolvency Resolution Process ("CIRP" in Short) against the Corporate Debtor Company, namely, Shambhu Textiles Mills Pvt. Ltd.

The Petitioner/Operational Creditor is a registered company under the provisions of Companies Act, 1956, with a Company Identification Number (CIN) - U50500GJ2010PTC061576. The registered office of the Petitioner is situated at A-301, "Aaryan", Near Pumping Station, Fatehpura, Paldi, Ahmedabad. The present Petition is filed through Authorised Person Shri Maulik Harishbhai Mehta, residing at A-6, Nikita Apartment, Opp. Fathnagar, Tubewell, Paldi, Ahmadabad.

The Respondent/Corporate Debtor, namely, Shambhu Textiles Mills Pvt. Ltd. was incorporated on 23.09.1996 with CIN: U17110GJ1996PTC030772. The authorised capital of the company is INR.4,55,000,00.00 (Rupees Four Crore Fifty Five Lakh Only) and the paid-up capital is INR.4,20,980,00.00 (Rupees Four Crore Twenty Lakh Ninety Eight Thousand Only). The registered office of the Corporate Debtor Company is situated at: Ranipur, Near Ranipur Bus Stand, Narol, Ahmadabad.

The present petition has been preferred by the Operational Creditor, HJM Fuels Pvt. Ltd. under Section 9 of the Insolvency and Bankruptcy Code, 2016 (herein after referred to as a "Code") seeking for initiation of Corporate Insolvency Resolution Process ("CIRP" in Short) against the Corporate Debtor Company, namely, Shambhu Textiles Mills Pvt. Ltd.

It is submitted by the Petitioner that the Respondent/Corporate Debtor is indebted to the Petitioner for INR.87,23,817 (Rupees Eighty Seven Lakh Twenty Three Thousand Eight Hundred Seventeen Only) along with interest @ 18% per annum pending payment. That the Operational Creditor was supplying Steam Coal to the Respondent used in the boiler of the Respondent during its manufacturing process. The Respondent used to make part payments periodically in random manner, towards the goods sold and supplied to it by the Petitioner. That by the end of November, 2017, the outstanding amount became huge and the Respondent was making part payment. That the record of the ledger accounts revealed that the bill raised during the period from 26.06.2015 to 28.11.2017 were not paid by the Respondent. It is very pertinent to know that during the said period 26.06.2015 to 28.1.2017, the Petitioner had supplied goods (Steam Coal) to the Respondent in around 35 different trucks loads at different point of time. In this regard various invoices/bills were raised by the Operational Creditor in proportion to the work carried on by the Operational Creditor and the same were duly accepted by the Corporate Debtor.

It is submitted that the said invoices/bills are still outstanding and have remained unpaid till date. That as on date there is an outstanding amount of INR.87,23,817 (Rupees Eighty Seven Lakh Twenty Three Thousand Eight Hundred Seventeen Only) along with interest @ 18% per annum), which is due and defaulted and payable by the Corporate Debtor. Date on which the first Default occurred is 26.06.2015.

It is submitted that the Form No.3 demand notice was issued by the operational creditor on 13.04.2018 under the provisions of Insolvency and Bankruptcy Code, 2016.

It is submitted that the Respondent kept paying till 28.11.2017 i.e., till the time the Petitioner was supplying the goods. However, the moment Petitioner called upon the Respondent to make payment towards huge outstanding amount before any more supply, the Respondent stopped transferring even the part payment. Thus, there was no dispute as to quality and quantity of the goods, supply to the Respondent. By making part payment towards earlier outstanding, the Respondent kept luring, the Petitioner to keep supplying the further goods to it.

It is submitted that the Petitioner is not the only victim of the Respondent. The Respondent has trapped and financially ruined several other suppliers, venders and consequently, the other venders/suppliers have filed Insolvency Petitions against the Respondent.

It is submitted that the last payment received from the corporate debtor was on 28.11.2017 for INR. 1,99,996.46. It shows that the Petitioner had maintained the running account in respect of goods supplied to the Respondent and the Respondent was making part payments randomly, sometimes twice or thrice a month.

It is submitted that after issuance of Demand Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016, the Respondent came out with false, fabricated and baseless theory of dispute by fabricating to back dated letters, debit note, reports etc. Thus, by making up back dated documents, the Respondent makes a weak an unsustainable attempt to wangle out the provision of the IB Code. The Petitioner took strong objection against these fabricated back dated document and made a clear statement before this Hon'ble Tribunal during the hearing that the Petitioner had never received any such documents and all these documents have been fabricated in back date to deceive not only the Petitioner but also to this Hon'ble Tribunal. In view of this, the Hon'ble Tribunal passed the judicial order dated 30.09.2019 directing the Respondent to produce the proof to show the documents which were sent and delivered to the Petitioner at the alleged point of time.

It is submitted that upon insistence by this Hon'ble' tribunal as well as by the Petitioner herein as to the proof of dispatch and delivery of these alleged documents, the Respondent ultimately produced an affidavit by its Peon stating that they have a practice of sending documents through ordinary post and hence there is no proof of dispatch of delivery.

It is further submitted that the Respondent had produced debit note dated 12.04.2017 along with its reply to the petition is afterthought and fake. It is submitted the bare look of the said debit note shows that it was hurriedly prepared and back dated after service of demand notice under Section 8 of Insolvency and Bankruptcy Code, 2016. Whenever, a debit notes in respect of goods returned or rejection of goods is prepared, the debit note must reflect the bifurcation between the amounts of the goods and application VAT/GST paid on it. This enables the seller to reserve VAT/GST genuine goods return/ good rejection cases. Hence, in the present case the debit note is hurriedly drafted for the entire amount of INR. 27,50,000.00 with any such bifurcation. So the debit note implies that the said amount of towards the goods supplied and not sales tax is included.

It is submitted that the Respondent has nowhere pleaded that it has returned the goods to the Petitioner. On the contrary, the Respondent argues that it consumes the entire quantity of Steam-Coal supplied to it one after another in total around 35 Trucks during two years and after consumption of the coal supplied during two years in different consignment, it realised that the coal was of inferior quality. So the Respondent has not returned any of the goods supplied to it and hence, consumed the entire quantity of the coal in its boiler. Hence, the Respondent cannot claim that the coal was an inferior quality.

It is submitted that Petitioner had paid applicable sales tax on the goods supplied by it to the Respondent and the Respondent must have taken in put tax credit of the same, however, with the malicious intention, the Respondent deliberately did neither produce its ledger account nor did it produce its GST returns to prove that it has rejected the goods supply by the Petitioner. Thus, it is apparent that there was no existing dispute between the parties and the defence taken by the Respondent is not only moonshine defence but also serious contempt of the Court.

In response to the present I.B. Petition, filed by the Petitioner, the Respondent has filed its written submission as follows:

It is submitted that the O.C has suppressed the fact that there was a pre-existing dispute with regard to the aforesaid allege outstanding dues. It is the case of the Respondent that the alleged payment has not been made to the Petitioner, not because the Respondent is unable to pay but because there is a pre-existing dispute with the Petitioner on account of the fact that the goods in question (Steam-Coal) supplied by the Petitioner were a sub-standard quality as a result the Respondent suffered huge losses inasmuch as the quality of the finished products manufactured by the Respondent were not of required quality and hence, the customers of the Respondents made several complaints and did not make the payments to the Respondents. That the Respondent reportedly sent several complaints to the Petitioner, much before the present proceedings, in the year 2015-2017. The Petitioner had also agreed to compensate the Respondent for losses suffered by the Respondent. Accordingly, a debit note was also issued by the Respondent to the Petitioner. However, the Petitioner did not fulfil its assurance and did not compensate the Respondent.

It is submitted that the Respondent, much before the present proceeding, on 24.07.2015, issued a letter to the Petitioner raising concerns about the quality of coal supplied by the Petitioner. In the said letter, the Respondent also conveyed the Petitioner that the random samples tested by laboratory (Independent laboratory) showed higher moisture content and less then permissible GCV. The laboratory analysis report is at page no.177 of the written submission of the Corporate Debtor).

It is further submitted that the random sampling and analysis, on 24.08.2015, it is revealed that the moisture of the coal supplied is against the normal standard. Therefore, again on 05.11.2016, the Respondent issued another letter complaining about the inferior quality. In the said letter, it was mentioned that because of the assurance given by the Petitioner that the goods would be of required quality, the Respondent had again started giving orders to the Petitioner, however, the quality of the goods of the Petitioner has not improved. It was also conveyed to the Petitioner that the Respondent is incurring losses on account of the substandard quality of the goods supplied by the Petitioner. It is further stated that the laboratory analysis report on page no. 184 and 185 are annexed with the reply of the Respondent.

It is submitted that in view of the standard quality of the goods the Respondent again stopped accepting the goods of the Petitioner and issued a Debit Note of an amount of INR. 27,50,000.00 dated 12.04.2017.(at page no. 189of the at annexure F, of the paper book).

It is further submitted that since there was no improvement in quality of goods, the Respondent again issued another letter dated 08.12.2017 complaining about the inferior quality of goods and calling upon the Petitioner to compensate the Respondent for the losses suffered by it. (at page no. 192 of paper book.)

It is submitted that during the course of arguments, the counsel for the Petitioner denied the receipt of the above referred letters (letters dated 24.07.2015, 05.11.2016, 12.04.2017 and 18.12.2017). The Respondent, therefore, filed an additional affidavit dated 14.10.2019. (at page 195 /251). It has been stated on affidavit by the Director of the Respondent that as is the usual practice in business, the aforesaid letters were issued to the Petitioner by regular post through Indian Postal Department. It has been also mentioned in the affidavit that as per the usual practice, the peon of the company was dispatching all the letters by dropping it into the nearby post box or at nearby Post Office. An affidavit of the Peon is also filed in the present proceeding which is at page 199/255.

It is further submitted that the laws of India permits issuance and dispatch of the letters by ordinary post. All over the country for years together the business community send the letters by ordinary post and, therefore, no fault can be found with the Respondent if the letters in usual course of business are sent by ordinary post. The insistence of the Petitioner to require the Respondent to produce proof of receipt of such letters by the Petitioner is absolutely ill-founded. The provisions of the IBC about dispatch of notice by Registered Post is only with regard to Notice to be issued under Section 8(1) of IBC, which cannot apply to letters issued in usual course of business between the parties.

It is submitted by the Applicant that there is no suit or arbitration pending between the parties. The petition filed by the Petitioner is otherwise complete in all respects.

It is further submitted by the Applicant that in the matter of Mobilex Innovation Pvt ltd Vs. KarusaSoftware Pvt Lts., Hon'ble Supreme Court has made it very clear any dispute raised by the corporate debtor after service of Demand Notice envisaged u/s 8 of IBC shall not be construed to be an existing dispute. In present case, the corporate debtor has not produced any single document to prove that there is any dispute between the parties prior to the demand notice.

It is submitted that the present petition is complete in all respects. The present petition is filed within limitation period. The resent petition fulfils all criteria laid down under the provisions of Insolvency and Bankruptcy Code, 2016 for admission of the present petition.

In light of the abovementioned facts and circumstance the Applicant's Prayer before this Adjudicating Authority is to Cause public announcement of the initiation of Corporate Insolvency Resolution Process and call for the submission of claims in accordance with Clause (b) of Sub-section (1) of Section 13 read with Section 14 of the Insolvency and Bankruptcy Code, 2016 to be admitted and be pleased to pass any further order in the interest of justice.

Now, the Petition is filed on 26.06.2018 under the Section 9 of the Insolvency and Bankruptcy Code, 2016 for the unpaid Operational Debt due of INR.87,23,817 (Rupees Eighty-Seven Lakh Twenty-Three Thousand Eight Hundred Seventeen Only) along with interest @ 18% per annum)

The case was taken up by this Adjudicating Authority on 16.07.2018, 27.08.2018, 11.10.2018, 29.11.2018, 02.01.2019, 13.02.2019, 05.04.2019, 18.06.2019, 30.07.2019, 19.08.2019, 05.09.2019, 17.09.2019, 30.09.2019, 16.10.2019 and 20.11.2019. The Arguments of the counsels of the Operational Creditor and Respondent were heard. On 26.11.2019 written submission was submitted on behalf of the applicant. On 11.07.2019, rebuttal affidavit was filed on behalf of the Petitioner/Operational Creditor.

The matter was finally heard on 20.11.2019. During the arguments, the Learned Counsel for the Operational Creditor submitted that the Petition may be admitted and an Interim Resolution Professional appointed in accordance with the provisions of the Section 16 of the Insolvency and Bankruptcy Code, 2016. Further, it is submitted that the Corporate Insolvency Resolution Process be initiated as per Section 9 of the Insolvency and Bankruptcy Code, 2016 and the moratorium period may also be declared.

Further, the Operational Creditor has suggested name of an Interim Resolution Professional ("IRP" for short). If, this I.B. Petition is admitted, an IRP needs to be appointed.

The Application has been filed on 26.06.2018 for operational debt due and defaulted of INR.87,23,817.00 (Rupees Eighty-Seven Lakh Twenty Three Thousand Eight Hundred Seventeen Only) as per the respective Invoices enclosed. 27.1 Date of invoice is from 16.12.2014 to 29.04.2015. 27.2 Date of first default is 26.06.2015 27.3 Application is filed within the limitation period as the date of default is 26.06.2015 and the date of filing this petition under Section 9 of IBC is 26.06.2018. the last payment received from the corporate debtor was on 28.11.2017 for INR. 1,99,996.46.

Considering the material, papers filed by the Petitioner on record and the facts mentioned in the Para No. 27, 27.1,27.2 and 27.3 this Adjudicating Authority is satisfied that,

As per the provisions of Section 13 and 14 of the I.B. Code on the date of commencement of insolvency, this Adjudicating Authority shall declare moratorium for prohibiting all of the following, namely: -

The Petitioner/Operational Creditor has suggested the name of KedarLaddha to act as Interim Resolution Professional in the present Petition

Hence, this Adjudicating Authority hereby appoints Mr. Kedar Laddha, having Insolvency Professional Registration Number IBBI/IPA-001/IP.P00586/2017-2018/11115, having Email-Id:[email protected]: 6/5 Sahyog Apt, B/h Keshavnagar, NrSubhash Bridge, RTO Circle, Keshavnagar, Ahmedabad-380027an Interim Resolution Professional.

The IRP is advised to file declaration disclosure statement within two days with this Registry.

The Interim Resolution Professional is further directed to make public announcement of moratorium in respect of Corporate Debtor Company soon after receipt of an authenticated copy of this order and to act further as per the order/direction issued by this Adjudicating Authority and to follow the provisions Section 13 and 14 and relevant provisions of the Insolvency and Bankruptcy Code. The Interim Resolution Professional shall perform all his functions contemplated, inter-alia, in Sections 15, 17, 18, 19, 20 & 21 of the Code and transact proceedings with utmost dedication, honesty and strictly in accordance with the provisions of the 'Code', Rules and Regulations. It is further made clear that all the personnel connected with the Corporate Debtor, its promoters or any other persons associated with the management of the Corporate Debtor are under legal obligation under Section 19 of the Code to extend every assistance and cooperation to the Interim Resolution Professional as may be required by him in managing the day-to-day affairs of the 'Corporate Debtor'. In case, there is any violation, the Interim Resolution Professional would be at liberty to make appropriate application to this Tribunal with a prayer for passing an appropriate order. The Interim Resolution Professional shall be under duty to protect and preserve the value of the property of the 'Corporate Debtor' as a part of its obligation imposed by Section 20 of the Code and perform all his functions strictly in accordance with the provisions of the Code, Rules and Regulations.

An authentic copy of this order to be communicated by this Registry to the Operational Creditor, Corporate Debtor, as well as to the Interim Resolution Professional and the Registrar of Companies by Speed Post/Registered Post at the earliest.

Hence, this CP (IB) No.307/9/NCLT/AHM/2018 is admitted on 28.05.2020 with the above Observations and Directions.