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Judgment
This is a petition filed by Mr. Hukam Singh proprietor of M/s H.H. Chemicals invoking the provision of Section 9 of Insolvency and Bankruptcy Code, 2016 (“the Code”) against the Respondent (Paramount Impex Private Limited) for initiating Corporate Insolvency Resolution Process (“CIRP”) against the Respondent.
The Applicant has averred as follows:
a. Operational Creditor is engaged in the business of manufacturing and trading of dyes and chemicals. Corporate Debtor placed purchase orders for purchase of dyes and chemicals from operational creditor from time to time and pursuant to the said purchase orders, operational creditor supplied goods to corporate debtor from its office.
b. The due date for making payment was 15 days from the date of bill.
c. As per terms mentioned in the bills the corporate debtor was liable to pay interest @ 24% per annum if the bill is not paid within 15 days.
d. Operational creditor is maintaining running account of transactions with corporate debtor and as per the running account, the balance amount payable by corporate debtor as on 22.05.2018 was Rs 17,00,612.00/-.
e. On 06.07.2018 operational creditor deposited in its bank account a cheque of Rs 2,00,000/- issued by corporate debtor, which was returned unpaid by the bank of corporate debtor due to insufficient funds.
f. On 01.08.2018 operational creditor debited a sum of Rs 6,54,186.00 towards interest for non-payment of operational debt @24% plus gst @18% as per the terms of payment mentioned on invoice, resulting into outstanding operational debt of Rs 23,55,578.00/-.
g. Operational creditor requested corporate debtor number of times to make payments against the outstanding amount, but no payments were made by corporate debtor till date.
h. Thereafter, operational creditor delivered a demand notice dated 13.08.2018 along with copies of invoices raised in Form 3 and Form 4 by speed post to corporate debtor at their registered office at new Delhi and email at pmount@nic.in and paramount@paramountimpex.in as per the provisions of section 8 (1) of IBC,2016, demanding payment of RS 23,55,578.00 in prescribed manner.
Despite service of notice of demand no payment has been forth coming, however a reply had been sent by the corporate Debtor dated 24.08.2018. Thereafter this petition.
Perusal of the reply of the Corporate Debtor to the petition brings out the following
a. The Corporate Debtor, contends at the outset, contents of the petition in their entirety are denied as being false, misleading, vexatious and unsustainable in law. It is submitted that the petition filed by the petitioner is replete with factual perversity and its contents are untenable in law.
b. The petitioner mentioned the date of default to be as 12.08.2016 in point no. 2 of para IV of the petition, however the petitioner has failed to establish that how and when the alleged default occurred on 12.08.2016.
c. It is submitted that the petitioner has filed ledger account at page no. 94-103 of the petition and as per the said ledger account, the petitioner maintained running account even after said alleged date of default of 12.08.2016 uptil 01.08.2018. the petitioner admittedly had raised invoice lastly on 29.01.2018 and was in business terms with the respondent thereafter as well. Therefore the alleged default of Rs 23,55,578/- on alleged date 12.08.2016 cannot be considered as a default in terms of the provisions of the Code as alleged interest of Rs 6,54,966/- was deliberately inflicted in the said ledger on 01.08.2018.
d. It is submitted by the respondent has never agreed to pay any interest much less as demanded by the Petitioner. A perusal of the statement of accounts annexed with the petition itself shows that interest was neither payable by the respondent nor ever charged by the petitioner. Had it been so, it would have been reflected in statement of accounts of respective financial year.
e. It is submitted that a bare perusal of the invoices allegedly raised by the Petitioner shows that there is no interest clause on the invoices, moreover, mere printing of interest clause on invoice is not a binding contract between the parties and no interest can be claimed on the basis of said invoices, moreover there was no such custom, practice in past while dealing with the petitioner.
f. It is submitted that the Hon'ble Supreme Court of India in judgement titled as M/s Vijay Industries Vs M/s NATL Technologies Limited reported as (2009) AIR (SC) 1695 has authoritatively held that in the absence of any specific agreement inter se in respect of payment of interest is a contentious issue and the dispute with regards the payment of interest is bonafide and it cannot, therefore legitimately be concluded that the respondent has neglected to pay.
g. The petitioner has filed the present petition inter alia on the basis of two invoices i.e. invoice bearing no. 832, dated 16.08.2016 for Rs 15,788/- and invoice bearing no. 1308 dated 23.06.2017 for Rs 40,416/-. It is submitted that against the above said two invoices, the petitioner has not supplied any material at all to the respondent.
h. The petitioner supplied defective goods which spoiled raw material of the respondent and the said defect in the material was brought to the notice of petitioner and after discussions various debit notes were issued by the respondent. The petitioner did not consider the above said debit notes while compiling the statements of accounts.
The petitioner raised invoices for such goods which were never ordered by the respondent and delivery of such goods was not accepted by the respondent and as such the said goods were rejected and returned to the petitioner's representative immediately at the time of the delivery of goods who also acknowledged delivery of such debit notes.
j. That the statement of accounts as filed by the applicant is manipulated one and does not depict correct accounts. It is submitted that the respondent has not received any goods against invoice no. 832, dated 16.08.2016 and invoice number 1308 dated 23.06.2017 for total Rs56,204/- besides this, The statement of accounts also does not show the debit notes for amount Rs 1,34,725/- issued by the respondent against rejected material defective material supplied by the applicant.
k. Petitioner intentionally and deliberately has not filed purchase orders issued by the petitioner as there is an arbitration clause in the purchase orders and in case of any dispute between the petitioner, the same ought to have been referred to arbitrator.
A Rejoinder has been filed on behalf of the Operational Creditor to the reply filed by Corporate Debtor wherein it is seen that the Operational Creditor has responded as follows :-
a. Operational creditor states that in para 2 and 3 of the reply the corporate debtor has objected the date of default in the demand notice and petition i.e. 12.08.2016, but failed to appreciate that the operational creditor is maintaining a running account of the transactions with the corporate debtor. There is an outstanding balance (without interest) of Rs 17,00,612/- on the date of demand notice and in such a case, invoices become unpaid of Rs 17,00,612/-. The date of default of all the invoices has been calculated on page 34-35 accordingly in the demand notice.
b. Corporate Debtor has raised an issue that interest was never part of agreement, but failed to notice the terms of payment mentioned on the invoices which clearly states that interest @24% will be charged on the bill if not paid within 15 days. The invoices are countersigned by corporate debtor and this is clearly the acceptance of terms of invoices.
c. The judgement quoted by corporate debtor has clearly misinterpreted the judgement of Hon'ble Apex court as the lines quoted in its reply are from the order of Hon'ble high court, which was appealed against and set aside by the Hon'ble apex court. The apex court admitted the payment of interest on the basis of terms mentioned on invoice, if the invoice is countersigned by the purchaser.
d. Corporate debtor raised objection that it has not received the goods against invoice number 832 and 1302 dated 23.06.2017, just because that the invoice does not bear the stamp of corporate debtor. The corporate debtor fails to appreciate that although these two invoices does not bear the stamp yet it contains the signature of the receiver with date. The goods against these invoices have been received by same representative of corporate debtor, who has received goods against various other invoices.
e. Corporate debtor in its reply stated that it has issued debit notes for defective and rejected material as per some endorsement on the invoices issued by operational creditor. These debit notes are the copies of invoices issued by the operational creditor to corporate debtor. These copies are in possession of corporate debtor and he has every right to write anything on these invoices. It has no value unless it is countersigned by the operational creditor. Further no proof of service of the debit notes has been brought on record by corporate debtor.
f. Corporate debtor has referred some purchase orders but failed to bring on record copies of purchase orders issued by it and received by operational creditor. The fact is that there was no purchase order and the goods were supplied on the basis of oral requisition from the corporate debtor.
Issues to be decided for adjudicating the present application are as follows :-
Whether the interest is the part of the agreement or not??
It is observed that interest was never part of agreement but the terms of payment mentioned on the invoices which clearly states that interest @24 % will be charged on the bill if not paid within 15 days. The invoices are countersigned by corporate debtor and this is clearly the acceptance of terms of invoices.
Whether Operational Creditor has delivered the goods against the two invoices?
The invoice number 832 dated 16.08.2016 and invoice number 1308 dated 23.06.2017, against both the invoices the respective goods had been received by the corporate debtor, although the two invoices do not bear the stamp of corporate debtor but it had been duly signed by the receiver with the date. The goods against both the invoices have been received by same representative of corporate debtor who has received goods against various other invoices.
Whether any debit notes issued by the corporate debtor or not?
There were no debit notes on the record issued or filed by the corporate debtor, and seems to be the result of an afterthought as these alleged rejections of the Corporate Debtor were never discussed or consented to by the operational creditor and never communicated to operational creditor. The so-called debit notes are the copies of invoices issued by the operational creditor to corporate debtor. These invoices are in the possession of corporate debtor and it has as rightly contended by the counsel for the Petitioner has every opportunity to write anything on these invoices. It has no value unless it is countersigned/ accepted by the operational creditor. Further no proof of service of the debit notes has been brought on record by corporate debtor.
It is pertinent to note that the cheque for Rs 2,00,000 issued by the Corporate Debtor to the Operational Creditor in relation to the supply of goods stands dishonoured showing the inability of the Corporate Debtor to answer its financial commitments. Further even assuming interest amount is not payable, however the amount in default exceeds Rs 1,00,000/-being the minimum threshold limit as fixed under IBC,2016. Hence on facts and circumstances of the case and taking into consideration the provisions of IBC,2016 in a view of a default in existence and the dispute being an afterthought, the Petition is required to be admitted.
The Petitioner has proposed the name of Mr. Vishal Malhotra, an Insolvency Professional registered with The Indian Institute of Insolvency Professionals of ICAI having registration number IPA-001/IP- P00872, to be the Interim Resolution Professional and he is appointed as the Interim Resolution Professional and a written communication in the format prescribed under Form 2 of the Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority) Rules, 2016 has been filed by the proposed interim resolution professional. As a consequence of the application being admitted in terms of Section 9(5) of IBC, 2016 moratorium as envisaged under the provisions of Section 14(1) and as extracted hereunder shall follow in relation to the Corporate Debtor:
- (a) 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; - (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; - (c) 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;
(d)the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.
However during the pendency of the moratorium period in terms of Section 14(2) and 14(3) as extracted hereunder:
(2)The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.
(3)The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
The duration of the period of moratorium shall be as provided in Section 14(4) of IBC, 2016 and for ready reference reproduced as follows:-
(4)The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process:
Provided that where 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 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.
Based on the above terms, the Application/Petition 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 IRP 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 in turn shall communicate with the Registrar of Companies, NCT of Delhi & Haryana with a view to enable the said authority to update its record as well as the Master Data maintained in MCA website.