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Judgment
ORDER
PER: BACHU VENKAT BALARAM DAS, MEMBER (JUDICIAL)
The instant application has been filed under Section 9 of IBC, 2016 by Kuber Shree Construction Company, the Operational Creditor, seeking initiation of CIRP against Gardenia India Limited, the Corporate Debtor for an alleged default amount of 1,28,07,911/-(Principal Amount: Rs. 1,13,62,244/- + Interest Amount: Rs. 14,45,668/-).
It is submitted that the Operational Creditor is a sole proprietor firm involved in the business of contract-based construction.
The Corporate Debtor is a company registered under the provisions of the Companies Act, 1956, having its registered office in Delhi.
It is further submitted that the Corporate Debtor issued a work order dated 22.01.2023 to the Operational Creditor for carrying out construction work such as boundary wall, brick, plaster and exevation etc. at Gardenia Gateway Plot No. 09, Sector 75, Noida, Uttar Pradesh-201301 for a total cost of Rs. 1,66,20,430/-.
The Operational Creditor carried out the construction work in accordance with the work order dated 22.01.2023 and raised 21 invoices from 03.04.2023 to 15.07.2024 for a total amount of Rs. 1,13,62,244/-. It was specifically mentioned in the invoices that the amount therein is due and payable within a period of 7 days from the date of issuance of the invoice and an interest @18% PA will be levied on the unpaid invoice amount after the expiry of 7 days.
It is also submitted that the Corporate Debtor failed to make any payment of any of the invoices raised by the Operational Creditor. The Operational Creditor, vide its email dated 05.09.2024, 28.09.2024 and 04.10.2024 requested the Corporate Debtor to make the payment of the Operational Debt to the Operational Creditor but despite verbal assurances, no payment whatsoever was made by the Corporate Debtor to the Operational Creditor.
Thereafter, the Operational Creditor vide its Demand Notice, under Section 8 of the Code dated 18.10.2024, issued in form-4 demanded the payment of unpaid invoices amounting to Rs. 1,30,07,911/- from the Corporate Debtor.
The Corporate Debtor vide its email dated 26.10.2024 replied to the Section 8 demand notice stating that it has remitted a sum of Rs. 2 lakhs towards the liability of the Operational Creditor and is arranging funds to discharge the remaining liability of the Corporate Debtor towards the Operational Creditor.
Since the Corporate Debtor failed to clear the outstanding dues, the present application under Section 9 of IBC, 2016, is being filed seeking initiation of CIRP against the Corporate Debtor.
The Applicant has placed on record a copy of the work order dated 22.01.2023 and copies of 21 invoices raised during the period 03.04.2023 to 15.07.2024 for a total amount of Rs. 1,13,62,244/-. As per the terms of the invoices, the amount is payable within a period of 7 days from the date of issuance of invoice and interest @ 18% per annum is leviable on the unpaid invoice amount after the expiry of 7 days.
The Applicant has also placed on record a copy of the demand notice under Section 8 of the Code in Form 4 dated 18.10.2024 demanding of Rs. 1,30,07,911/- from the Corporate Debtor.
The Respondent/Corporate Debtor filed a reply affidavit, wherein it has been admitted to have received 21 invoices during the period 03.04.2023 to 15.07.2024, amounting to Rs. 1,13,62,244/-. It is stated that the outstanding operational debt currently stands at Rs. 1,30,07,911/- after accounting for adjustments.
The Corporate Debtor has submitted in its reply dated 26.10.2024 to the demand notice issued under Section 8 of the Code that it has clearly communicated to the Operational Creditor that it is making sincere efforts to arrange funds and settle the outstanding dues and resolve the matter amicably.
Further, the Corporate Debtor remitted Rs. 2 Lakhs on 25.10.2024 and requested the Operational Creditor not to initiate the legal proceedings.
It is further contended that the Corporate Debtor is experiencing severe financial stress. The Corporate Debtor is not commercially insolvent and intends to settle its dues and maintain a positive relationship with the Operational Creditor.
We have heard the submissions of Learned Counsel appearing for both parties and perused the records.
Before proceedings to decide the matter on the merits. We would like to refer to some of the orders passed by us, which are as under:-
“On 26.03.2025, the arguments of Learned Counsel for both the parties were heard and concluded. The parties were granted liberty to file brief note of submissions and matter was listed on 15.04.2025 for compliance.”
“On 15.04.2025, no one had appeared on behalf of the Applicant. Learned Counsel appeared on behalf of the Corporate Debtor submitted that the settlement talks are going on between the parties and the matter was adjourned to 06.05.2025.”
“On 06.05.2025, Learned Counsel appeared for the Applicant as well as Respondent submitted that the settlement talks have failed and consequently, orders were reserved.”
On 11.12.2024, this Adjudicating Authority recorded the following:
“***** The Applicant shall also file an affidavit indicating therein that there is no collusion between the parties in filing the present application, within one week.”
In Compliance of the order dated 11.12.2024, the Applicant filed an Affidavit dated 20.01.2025 wherein the Applicant stated that the Operational Creditor has independently initiated the application under Section 9 of the Code, 2016, without any collusion with the Corporate Debtor.
It is an admitted case that the Applicant/Operational Creditor issued a work order dated 22.01.2023 to the Corporate Debtor for rendering the services in question and consequently, the Operational Creditor issued 21 invoices to the Corporate Debtor for the period 03.04.2023 to 15.07.2024 for an amount of Rs. 1,13,62,244/-
The Corporate Debtor gave a reply dated 26.10.2024 to the demand notice under Section 8 of the Code which is extracted below:-
“Dated: 25/10/2024
To, Proprietor, Amit Kumar Chauhan KUBER SHREE CONSTRUCTION CO. Pandav Nagar Delhi-110091
Subject: Your Notice for outstanding amount of Rs. 1,30,07,911/-
Dear Sir,
This is without prejudice to our rights and contentions. We are really shocked to receive this demand notice from you when we have personally requested you to not take any legal action as we are in the process of arranging some funds.
We have remitted yesterday a sum of Rs 2 lakhs to you towards your demand and arranging funds for the payment of balance amount kindly acknowledge the same.
In the meanwhile we request you to not proceed further and also consider reducing the interest rate.
Thanking you Sincerely, For GARDENIA INDIA LTD.”
Further, the Corporate Debtor in its reply affidavit filed to the Section 9 application has admitted having received 21 invoices from 03.04.2023 to 15.07.2024, amounting to Rs. 1,13,62,244/-, and that the outstanding operational debt currently stands at Rs. 1,30,07,911/-.
The Corporate Debtor has also admitted its liability in its reply Affidavit. The relevant paragraphs of the reply affidavit are extracted below:-
“6.That the Corporate Debtor, acknowledging its liability, informed the Operational Creditor in its email reply dated 26.10.2024 that it was making every effort to arrange funds and settle the outstanding dues.
7.That as a demonstration of good faith, the Corporate Debtor remitted र2,00,000/- on 25.10.2024, just a day before submitting the reply to the demand notice, and requested the Operational Creditor not to initiate legal proceedings. *****
9.That the Corporate Debtor's inability to discharge its liabilities promptly is not intentional but a result of unforeseen financial difficulties affecting its cash flow.”
The reply given by the Corporate Debtor to the demand notice under Section 8 of the Code, as well as the reply affidavit to the Section 9 application, clearly established the existence of an operational debt, and thus the Corporate Debtor has defaulted in its payment obligations.
In the present case, there is debt which is more than the threshold limit of Rs. 1 crore, there is a default in the repayment of the said debt and there is no pre-existing dispute with respect to this debt, and also the application is filed within limitation as the date of default being 10.04.2023 and the date of filing of present application is 13.11.2024, which is within three years of the limitation period. Further, all other conditions for admission of application under Section 9(5)(i) of the Code against the Corporate Debtor, have also been found to be fulfilled and the Application is complete in all respect, thus, we find this application as being fit for admission under Section 9(5)(i) of the Code for starting CIRP against the Corporate Debtor.
Therefore, we are of the view that the present application under Section 9 of the IBC, 2016 ought to be admitted.
In view of the above facts and circumstances and the foregoing discussion, we are satisfied that the present Application fulfills the criteria laid down under Section 9 of the Code. It is accordingly, ordered as follows: -
The Application bearing (IB)-806(ND)/2024 filed by the Applicant under Section 9 of the Code r/w Rule 6 of the Adjudicating Authority Rules for initiating CIRP against the Respondent is hereby admitted.
We declare a moratorium in terms of Section 14 of the Code. The necessary consequences of imposing the moratorium flow from the provisions of Section 14(1)(a), (b), (c) & (d) of the Code. Thus, the following prohibitions are imposed:
i.“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;
ii.Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;
iii.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;
iv.The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the corporate debtor.
[Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period;]”
It is made clear that the provisions of moratorium shall not apply to transactions which might be notified by the Central Government or the supply of the essential goods or services to the Corporate Debtor as may be specified, are not to be terminated or suspended or interrupted during the moratorium period. In addition, as per the Insolvency and Bankruptcy Code (Amendment) Act, 2018 which has come into force w.e.f. 06.06.2018, the provisions of moratorium shall not apply to the surety in a contract of guarantee to the Corporate Debtor in terms of Section 14(3)(b) of the Code.
Section 9(4) of the Code does not mandate the Operational Creditor to propose the name of an Insolvency Professional along with the application to act as the Interim Resolution Professional (IRP) for the Corporate Debtor; the Operational Creditor has not proposed any name of the Resolution Professional. Therefore, this Adjudicating Authority appoints Mr. Narender Kumar Sharma as the Interim Resolution Professional of the Corporate Debtor from the available list of the panel of Resolution Professionals as maintained by the IBBI. The registration number of the IRP is IBBI/IPA-002/IP-N00125/2017-2018/10294, the contact No. of the IRP is +919818782268 and the email id of the IRP is [email protected]. The appointed IRP is further directed to submit a valid Authorization for Assignment along with Written Consent in Form-2 and a copy of Registration Certificate within 3 days of the pronouncement of this order.
In pursuance of Section 13(2) of the Code, we direct the IRP, as the case may be to make a public announcement immediately with regard to the admission of this application under Section 9 of the Code. The expression immediately means within three days as clarified by Explanation to Regulation 6(1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
During the CIRP period, the management of the Corporate Debtor shall vest in the IRP/RP, in terms of Section 17 of the IBC. The officers and managers of the Corporate Debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP within one week from the date of receipt of this order, in default of which coercive steps will follow. There shall be no future opportunity given in this regard.
The IRP is expected to take full charge of the Corporate Debtor’s assets, and documents without any delay whatsoever. He is also free to take police assistance and this Adjudicating Authority directs the Police Authorities to render all assistance as may be required by the IRP in this regard.
The Operational Creditor is directed to deposit a sum of Rs. 2,00,000/- (Rupees Two Lakhs only) with the IRP to meet out the expenses to perform the functions entrusted to him. However, this amount shall be subject to adjustment by the Committee of Creditors, based on the accounts maintained by the IRP upon the conclusion of the CIRP.
The IRP/RP is further directed to submit periodic progress reports to this Adjudicating Authority at the conclusion of each quarter.
In accordance with the provisions of the Code, the Registry is directed to communicate a copy of the order to the Operational Creditor, the Corporate Debtor, the IRP and the Registrar of Companies, NCT of Delhi and Haryana, by Speed Post and by email, at the earliest but not later than seven days from today. The Registrar of Companies shall update his website by updating the status of the Corporate Debtor and specific mention regarding admission of this application must be notified.
The Registry is further directed to send a copy of this order to the Insolvency and Bankruptcy Board of India (“IBBI”) for their record.
No order as to costs.