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Judgment
ORAL ORDER
The present petition has been preferred under Section 9 of IBC, 2016. The details of amount of debt and date of default are given in Part IV of the application which reads thus:-
The invoices raising the demand are enclosed as Annexure A-6 to the petition. Ld. Counsel for the Applicant could draw our attention to balance sheet of Corporate Debtor to espouse that the Corporate Debtor has acknowledged liability to pay the amount of debt defaulted to be paid, as referred to in Part IV of the application. The copy of balance sheet is not placed on record either virtually or physically, however the Ld. Counsel for the Corporate Debtor has accepted the liability and has not disputed the balance sheet. The relevant excerpt of the balance sheet reads thus:-
Precipitated collusion between the parties, in terms of the order dated 25.11.2024, we direct the Petitioner as well as Corporate Debtor to file their independent affidavit indicating therein that petition is not collusive. The Affidavit filed by the Petitioner is found on record and Clause 2 to 6 of the affidavit reads thus:-
“2.That the present affidavit is filed in compliance of the order dated 25.11.2024 passed by this Hon’ble Tribunal, wherein this Hon’ble Tribunal directed the Operational Creditor to file an independent affidavit stating the present petition filed under Section 9 of the Code is non-collusive in nature. Copy of the order dated 25.11.2024 is annexed herewith and marked as ANNEXURE A.
3.That in due compliance of the order dated 25.11.2024, the Operational Creditor herein declare that the present petition bearing CP(IB) No. 594 of 2024 filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter, “Code”) is non-collusive in nature.
4.That the Operational Creditor further declares that the Operational Creditor has not entered into any collusive arrangement or agreement with the Corporate Debtor/ Respondent i.e. Surya Milk Products Private Limited to initiate the present proceedings.
5.That the instant Affidavit is filed in compliance of the order dated 25.11.2024 passed by this Hon’ble Adjudicating Authority.
6.I respectfully submit that the present petition, bearing CP(IB) No. 594 of 2024 filed under Section 9 of the Code, is bona fide and has been initiated in good faith.”
The Corporate Debtor as also filed an independent affidavit stating therein that the captioned petition is not collusive. The relevant excerpt of affidavit reads thus:-
“2.That vide order dated 25.11.2024, this Hon'ble Tribunal was pleased to direct the Corporate Debtor/Respondent herein to file an independent affidavit stating that the present petition is not collusive in nature. Further, this Hon'ble Adjudicating Authority was also pleased to direct the respondent to disclose the details of all the liabilities of the Corporate Debtor and that the affidavit shall also be accompanied by an audited balance sheet of the Corporate Debtor.
3.That in due compliance of the order dated 25.11.2024, the Respondent herein declare that the present petition bearing CP(IB) No. 594 of2024 filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter, "Code") is non-collusive in nature.
4.That the Corporate Debtor has not entered into any collusive arrangement or agreement with the Applicant, Kaveri Sales Corporation, or any third party to initiate or advance this proceeding.”
Along with the affidavit, the Corporate Debtor has also acknowledged his balance sheet and acknowledging the liability to pay the defaulted amount of debt to the Operational Creditors. The demand notice served by the Operational Creditor upon Corporate Debtor has been enclosed as Annexure A-12 to the petition. The reply to demand notice is available on record as Annexure A-13.
As can be seen from reply to demand notice, the Corporate Debtor has not disputed the liability to pay the defaulted amount and has taken the stand that it is in the process of obtaining funds from its customers to raise the payment. The text of reply to demand notice reads thus:-
The Petitioner has also filed an affidavit in terms of the provisions of Section 9(3)(b) of IBC, 2016. The relevant excerpt of the affidavit reads thus:-
The consent of RP is placed on record as Annexure A-4 to the petition. The RP has declared that no disciplinary proceedings pending against him. The relevant excerpt of Form 2 placed on record by the Petitioner reads thus:-
“(iv)Certify that there are no disciplinary proceedings pending against me with the Board or Institute of Insolvency Professionals of Institute of Cost Accountants”
As can be seen from the provisions of Section 9(5) of IBC, 2016, the Adjudicating Authority shall within 14 days of the receipt of the application under sub-section (2) of Section 9 of the Code shall admit the application if;-
a. The application made under sub-section (2) is complete;
b. There is no payment of unpaid of operational debt;
c. The invoice or notice for payment to corporate debtor has been delivered by the operational creditor;
d. No notice of dispute has been received by the operational creditor or no dispute in the information utility; and
e. There is no disciplinary proceedings pending against any resolution professional proposed under sub-section (4), if any.
The Ld. Counsel for the Corporate Debtor categorically submitted that the amount of debt has not yet been repaid. Even in reply to the demand notice also the Corporate Debtor did not dispute the liability to repay the amount of debt. Only arguments raised on behalf of the Corporate Debtor is that the demand notice issue was not on prescribed form i.e. Form 4 and was in Form 3. In her submission, the difference between the two forms is when Form 3 need to be served independently enclosing therewith the invoices raised, the Form 4 is utilised to serve demand notice along with no invoices.
We are of the view that even when Form 3 utilised by the Creditor to serve demand notice is accompanied by invoices, there can be no infirmity in the process, as the object and purpose of demand notice is that the Corporate Debtor should know that the Creditor has demanded the amount of default and it is liable to repay the same, failing which it may face the consequences in terms of the provisions of Section 9 of IBC, 2016. The two forms prescribed are only for the sake of convenience. The intent of legislation to prescribed Form 4 may be with the object that it can be easily deciphered that whether the Creditor has raised invoices or not. In any case, in the present case the Corporate Debtor has accepted the liability and it has also been stated by Ld. Counsel for the Corporate Debtor at the Bar that the amount of debt has not been repaid. In the wake the aforementioned, technical plea is of no consequence.
Also, in Company Petition No. IB-219(ND)/2021, a coordinate Bench could rule that the issuance of demand notice in Form 3, even in a situation where invoices could be issued would not vitiate the demand notice. Para 5 of the order reads thus:-
“5.That vide order dated 02.07.2021, this Bench has held the following in respect of the aforesaid issue:
“29.Accordingly, we hold that in a situation where an Operational Debt arises out of the provision of goods and services and pursuant to that Invoices are raised, there is no illegality in choosing the Form 3 as provided in Rule 5(1)(a) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for sending the Demand Notice provided that the Unpaid Invoices forming part of the transaction are annexed therewith. Hence, issuance of Demand Notice in Form 3 annexed with invoices by the Operational Creditor in the present case would be in order in terms of the Rules.”
In view of the aforementioned, we are satisfied that the requirement of Section 9(5)(1) of IBC, 2016. In the wake, we have left no option but to admit the main petition. Ordered accordingly.
In view of the aforementioned, we are left with no option but to admit the present application. Order accordingly. In the wake, moratorium provided under Section 14 of IBC, 2016 is declared qua the CD and as a necessary consequence thereof the following prohibitions are imposed, which must be followed by all and sundry:
The institution of suits or continuation of pending suits or proceedings against the Respondent 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 Respondent 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 Respondent in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the Respondent.
As proposed by the Petitioner Mr. Shamsher Bahadur Singh, having Registration IBBI/IPA-003/0341/2021-2022/13623 is appointed as IRP, subject to the condition that no disciplinary proceeding is pending against him and disclosures as required under IBBI Regulations, 2016 are made by him within a period of one week from this Order. It is further ordered that Mr. Shamsher Bahadur Singh shall take charge of the CIRP of the Corporate Debtor with immediate effect and would take steps as mandated under the IBC specifically under Section 15, 17, 18, 20 and 21 of IBC, 2016 read with extend provisions of IBBI (Insolvency Resolution of Corporate Persons) Regulations, 2016.
The Petitioner is directed to deposit Rs. 2,00,000/- only with the IRP to meet the immediate expenses. The amount, however, will be subject to adjustment by the Committee of Creditors as accounted for by Interim Resolution Professional and shall be paid back to the Financial Creditor.
A copy of this Order shall immediately be communicated by the Registry/Court Officer of this Tribunal to the Petitioner /Financial Creditor, the Respondent/Corporate Debtor and the IRP mentioned above.
In addition, a copy of this Order shall also be forwarded by the Registry/Court Officer of this Tribunal to the IBBI for their records.