M/s. Rishabh Triexim LLP vs M/s. Nandi Irrigation Systems Limited

Per : Sanjay Puri, Member (Technical)

This application, filed under Section 9 of the Insolvency and Bankruptcy Code (IBC) by M/s Rishabh Triexim LLP, the Operational Creditor (OC), seeks to initiate Corporate Insolvency Resolution Process (CIRP) against M/s Nandi Irrigation Systems Limited, the Corporate Debtor (CD). It is alleged that the CD defaulted on a debt amounting to Rs 11,32,41,629, which was due and payable as of 30.11.2022. An additional sum of Rs 46,66,605 is claimed as interest on the said debt.

The principal debt arose from the supply of material (PVC Resin) during the period from 01.04.2022 to 19.11.2022, with 175 invoices totalling Rs 45,91,09,759. Together with an opening balance of Rs 11,91,56,747, the total payable amount by the CD stood at Rs 578,266,506. Out of this, Rs 46,50,24,877 has been paid, leaving an outstanding balance of Rs 11,32,41,629, which remains unpaid as per the OC, along with accrued interest. These figures are drawn from the ledger account^{11.Pages 701 to 719 of the application.} maintained by the OC, which is enclosed with the application.

It is claimed that the CD, in a WhatsApp message dated 28.10.2022, acknowledged the debt of Rs 11,87,26,853 as of 09.09.2022. Due to the CD’s default in payments, a meeting^{22.Page 539 of the application.} was held on 13.10.2022, where the outstanding amount was agreed to be reduced to Rs 9.50 crores by 31.12.2022 and further to Rs 8.50 crores by 31.03.2023. Despite several reminder emails^{33.Pages 541 to 566 of the application.} thereafter, from the OC in November 2022, no payment was made. Consequently, the OC issued a Demand Notice^{44.Pages 567 to 579 of the application.} under Section 8 of IBC on 30.11.2022.

In response, the CD, in its reply^{55.Pages 583 to 588 of the application.} dated 17.12.2022, raised issues regarding the “inferior material supplied” and claimed that they had communicated this issue to the OC on 02.12.2022. The CD denied any admission of liability and asserted that a dispute had arisen.

The present application was filed on 18.01.2023. A counter reply from the CD and a rejoinder from the OC followed. Additionally, on 30.10.2023, the CD filed IA No. 1712 of 2023, introducing documents including FIR copies, one filed by the OC against the CD on 17.04.2023 and the other by the CD against the OC on 28.10.2023.

After the hearing on 29.07.2024, a clarificatory memo was filed by the OC explaining the opening balance of Rs 11,91,56,747 as of 01.04.2022. Both parties also submitted written arguments reiterating their positions.

The documents introduced through this IA relate to criminal cases between the parties, which are to be addressed by the appropriate judicial forum. These FIRs were filed much later than the main CP (18.01.2023) and have no relevance to the Section 9 IBC proceedings. Therefore, the documents filed with IA No. 1712/2023 are disregarded, and the IA is dismissed.

Upon reviewing the records and hearing the parties, the following facts are undisputed:

The supply of material by the OC through 175 invoices has not been denied by the CD. The material's delivery is also confirmed by lorry receipts^{66.Pages 645 to 700 of the application.} bearing details such as origin, destination, quantity, value, freight, and truck numbers. Each lorry receipt is stamped and signed on behalf of the CD, confirming receipt.

The ledger account presented by the OC records the amounts from the invoices and payments received from the CD, which are corroborated by the OC's bank statements^{77.Pages 595 to 644 of the application.}. The authenticity of the ledger is further confirmed by a WhatsApp message^{88.Page 525 of the application.} from the CD dated 10.09.2022, attaching copy of its own ledger account for the OC^{99.Page 526 to 538 of the application.}, which aligns with the OC's ledger entries, except for a minor difference of Rs 398 in the opening balance.

No issues regarding the supplied material were raised by the CD prior to 02.12.2022. None of the lorry receipts indicate any defect or shortfall at the time of receipt, by the CD.

Given these facts, the CD’s arguments concerning the debt are addressed as follows:

The first argument regarding the difference between the invoice amount and the claimed debt is without any merit. The ledger statement filed along with the application, which corresponds to the ledger statement maintained by the CD in its books, with matched bank records, clearly shows the amount of Rs 11,32,41,629 as outstanding debt

The second argument regarding the "inferior quality" of the material is unsupported by evidence. The CD claims that 1091.9 MT of PVC Resin worth Rs 13,67,37,359 was rejected, but no proof of return or disposal of this large quantity (of 1091.9 MT) of PVC resin has been provided. Considering that the material was supplied in 25kg bags, this would amount to 43,676 bags, and yet no evidence has been presented to demonstrate how this many bags were stored, returned, or disposed of. Additionally, as noted before, no defects about the material supplied were recorded in the lorry receipts at the time of delivery. This claim is unsubstantiated and is rejected.

The CD’s third argument, suggesting a pre-existing dispute, hinges on a letter^{1010.Pages 581 & 582 of the application.} dated 02.12.2022, which stated simply that:

However, this letter was sent after the OC's email dated 01.12.2022 requesting confirmation of goods receipt. While it is true that this letter was sent before the Demand Notice dated 30.11.2022 was received by the CD, it only conveys a manufactured dispute about the quality of the material supplied by the OC. As discussed in the earlier paras, there is no evidence corroborating the claim of inferior quality of goods supplied by the OC to the CD. Such uncorroborated contention does not require any investigation or enquiry and is liable to be rejected.

Thus, the principal debt of Rs 11,32,41,629 is confirmed, and no pre-existing dispute concerning the same is evidenced. Interest on the outstanding amount is also admissible as per the supply invoices, which stipulate a 24% annual interest rate for overdue payments.

Accordingly, we allow the present application under Section 9 of the IBC with the following directions:

The Application is admitted and this Adjudicating Authority orders the commencement of the Corporate Insolvency Resolution Process, which shall ordinarily be completed within the timelines stipulated in the Code, 2016 (as amended), reckoning from the date on which this order is passed.

The Operational Creditor has not named anyone as Interim Resolution Professional (IRP) and has requested this Adjudicating Authority to appoint one from the Insolvency Resolution Professionals as IRP. The Insolvency and Bankruptcy Board of India (IBBI) has recommended a panel of Insolvency Professionals for appointment as Insolvency Resolution Professional for the period from July 1, 2024 to December 31, 2024 in compliance with Section 16(3)(a) of the Code in order to avoid delay. Accordingly, we appoint Mr Maruti Venkata Subba Rao Poluri^{1111.Having Registration No. IBBI/IPA-002/IP-N00924/2019-2020/13001, e-mail: cssubbarao@gmail.com, Mobile No.9866684676.}. As per the IBBI website, his AFA is valid upto 30-06-2025. He is directed to file Authorization for Assignment within three days from the date of this order.

The IRP is directed to take charge of the Respondent/Corporate Debtor’s Management immediately. He is also directed to cause public announcement as prescribed under section 15 of the IB Code, 2016 within three days from the date the copy of this order is received, and call for submissions of claim in the manner as prescribed.

We direct the Operational Creditor/Petitioner to pay a sum of Rs.2,00,000/- towards the advance fee of IRP and expenses towards CIRP, which shall be ratified later on by CoC.

The moratorium is hereby declared which shall have effect from the date of this order till the completion of CIRP, for the purposes referred to in Section 14 of the IB Code, 2016. It is hereby ordered to prohibit all of the following namely:-

The supply of essential goods or services of the Corporate Debtor shall not be terminated or suspended or interrupted during moratorium period. Further, if the IRP considers supply of any goods or services critical to protect and preserve the value of the Corporate Debtor and manage the operations of such Corporate Debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such Corporate Debtor has not paid dues arising from such supply during the moratorium period. Furthermore, the provisions of Sub-section (1) of Section 14 shall not apply to such transactions, agreements. or other arrangement as may be notified by the Central Government in consultation with any operational sector regulator or any other authority.

The IRP shall comply with the provisions of Sections 13(2), 15, 17 & 18 of the Code. The Directors, Promoters or any other person associated with the management of Corporate Debtor are directed to extend all assistance and co-operation to the IRP as stipulated under Section 19 and for discharging the functions under Section 20 of the I&B Code, 2016.

The Petitioner/Operational Creditor as well as the Registry is directed to send the copy of this Order to IRP so that he could take charge of the Corporate Debtor's assets etc. and make compliance with this Order as per the provisions of I&B Code, 2016.

The Registry is directed to communicate this Order to the Operational Creditor and the Corporate Debtor.

The Registry shall also communicate this Order to the ROC, Hyderabad for updating the status of the Corporate Debtor in the MCA website.

Accordingly, this Petition is admitted.