M/s Vyash Vanijya Private Limited vs M/s Kaved Steel Products Private Limited

[PER: CORAM]

This C.P. (IB) No. 444 of 2025 (Application) was filed on 07.03.2025 by M/s Vyash Vanijya Private Limited, the Operational Creditor (OC) having CIN No.: U5l909WB2011PTC171506, under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against M/s Kaved Steel Products Private Limited, the Corporate Debtor (CD), having CIN No.: U74900PN20011PTC140279.

As per Part IV of the Application, the amount claimed to be in default is Rs.1,79,21,783/- (Rupees One Crore Seventy-Nine Lakhs Twenty-One Thousand Seven Hundred Eighty-Three), due towards invoices raised for the goods supplied from 08.04.2022 to 04.07.2022. The date of default mentioned in Part IV is 08.05.2022.

The Applicant has proposed one Mr. Vishnu Kant Kabra, having Registration No. as IBBI/IPA-001/IP-P-02178/2021-2022/13747, to act as the Interim Resolution Professional (IRP).

The Applicant and the CD are engaged in the business of trading in iron and steel.

The CD had approached the Applicant for the supply of Cold and Hot Rolled Coils. Pursuant to commercial discussions, the Applicant issued a formal quotation bearing Quotation No.: QN/002/Mar/21-22 dated 05.03.2022. Upon mutual agreement on the terms contained therein, the CD issued a Purchase Order on 31.03.2022. Based on this contractual understanding, the Applicant proceeded to supply the requisite goods between 08.04.2022 and 04.07.2022 and raised invoices corresponding to each consignment on the dates 08.04.2022, 24.04.2022, 02.05.2022, 24.05.2022, 19.06.2022, 30.06.2022, and 04.07.2022.

Following is the computation sheet provided by the Applicant containing the amount due from each invoice:

The Form 5 is signed by Mr. Dilip Ramniklal Sonpal, authorised representative of the Applicant pursuant to a Board Resolution dated 24.01.2025

The aggregate amount outstanding on these invoices stands at Rs.1,79,21,783/-. The first invoice, dated 08.04.2022, became due on the same day and has remained unpaid since. The Applicant has placed on record its ledger statement from the period 01.04.2022 to 30.11.2024, showing all relevant entries of supply and payment from 01.04.2022 to 30.11.2024, clearly evidencing the said outstanding balance. Despite repeated follow-ups and proposals of settlement and part-payment options extended by the Applicant, there was no effective response or action from the CD.

Owing to this persistent default, the Applicant’s business has suffered significant disruption. The Applicant issued a final reminder letter dated 20.10.2023 requesting remittance of the dues, to which the CD responded on 06.11.2023, seeking an extension of 6 months to make the payment. However, even after the lapse of the extended period, the CD failed to clear the dues. Consequently, the Applicant, having exhausted all reasonable avenues for resolution, was compelled to initiate legal recourse. A Demand Notice under Section 8 of the IBC, dated 22.11.2024 (track consignment report attached), was sent to the CD, followed by a formal Demand Notice in Form 3 dated 02.12.2024 through Adv. Raina Birla, which was duly served upon the CD at its operational office on 04.12.2024.

As the CD failed to provide any concrete response, assurance of payment, or resolution mechanism, the Applicant has proceeded to file the present Application under Section 9 of the IBC, seeking initiation of the CIRP against the CD.

The Applicant has attached the following supporting documents along with the Application and Brief Synopsis dated 11.06.2025:

An Additional Affidavit dated 05.05.2025, affirmed by Adv. Raina Birla, Counsel for the Applicant, was filed to clear the discrepancies pointed out by the Bench vide Order dated 02.04.2025.

The Applicant submits that the originally registered address of the Corporate Debtor is D-531, 544. 5th Floor, Clover Centre, Moledina Road, Camp. Pune, Maharashtra – 411001. However, the demand notice dated 02.12.2024 was delivered at 539. 5th Floor. Pune H.O., Maharashtra-411001. The CD had relocated its office operations to the aforesaid address prior to the issuance of the demand notice. The Applicant clarified that the demand notice was served at the CD’s relocated operational premises, and to substantiate this, a pamphlet displaying the updated address was annexed, which states that “M/S KAVED STEEL PRODUCTS P.LTD. OFFICE SHIFTED TO OFFICE NO. 539”. The delivery of the demand notice at the said address was thus valid and proper. There was no intention to mislead or misdirect service upon the CD.

Additionally, the Applicant informed the Tribunal that the NeSL Record of Default (Form D) was yet to be generated by the relevant authority and would be placed on record once available. Furthermore, the Applicant rectified the Form 5, amending the date of default from 08.04.2022 to 08.05.2022 in accordance with this Bench’s earlier directive. The amended Form 5 is signed by Mr. Dilip Ramniklal Sonpal.

It has come to our observation that while amending the date of default, the Applicant made a typographical error by changing the date of initiation of supply of goods as well from 08.04.2022 to 08.05.2022, through formal tax invoices attached along with the Application the supply of goods commenced from 08.04.2022 and not from 08.05.2022 and therefore we have considered the due date of first supply as 08.04.2022.

The CD filed its Affidavit-in-Reply dated 11.06.2025, affirmed by one Mr. Shailesh Shashikant Saraswate, who is stated to be a Director (DIN: 02033279) and an authorised representative of the CD pursuant to a Board Resolution dated 30.05.2025.

The CD primarily relied on the arbitration clause (Clause 2) in the Purchase Order, which provides that any disputes arising shall be resolved through arbitration in Mumbai. For brevity, the said terms and conditions are extracted as herein below:

The CD argues that the Applicant has failed to invoke this arbitration clause; therefore, the present Application is untenable. The CD further states that the non-payment arose due to the severe financial distress caused by the COVID-19 pandemic. A letter dated 06.11.2023 requesting a 6-month extension was sent, and according to the CD, the Applicant acted in haste by filing the present Application without considering its request.

The CD also contends that this Application is filed with the sole intent of recovering the debt rather than resolving the insolvency of the CD, thereby violating the object and spirit of the IBC. Without prejudice to its contentions, the CD offered a settlement amount of Rs.75,00,000/- as a Full and Final Settlement (FNF) against the total debt of Rs.1,79,21,783/-, to be paid in the following tranches:

The CD submitted that such an amount would exceed what the Applicant might receive in liquidation or CIRP, and thus the Application should be dismissed with costs to deter misuse of the insolvency framework.

The Applicant filed its Brief Synopsis dated 11.06.2025, affirmed by one Mr. Shailesh Shashikant Saraswate, who is stated to be a Director (DIN: 02033279) and an authorised representative of the CD pursuant to a Board Resolution dated 30.05.2025.

The Applicant reaffirmed that it has obtained and placed on record the NeSL Form D, which corroborates the existence of default.

With respect to the arbitration clause, the Applicant relied on the ruling in Mr. Shahi Md. Karim v. M/s. Kabamy India LLP & Ors. [Comp. App. (AT) (CH) (Ins.) No. 16/2023], where it was held by the Hon’ble NCLAT Chennai that the presence of an arbitration clause does not operate as a bar on the Operational Creditor from initiating insolvency proceedings under Section 9 of the IBC. The Tribunal reiterated that the IBC is not merely a recovery mechanism, but a statutory process to ensure the resolution of corporate insolvency. The relevant extract is reiterated below:

Regarding the CD’s offer of Rs.75,00,000/-, the Applicant argued that this was merely another in a series of unfulfilled promises made by the CD. The Applicant emphasized that no amount has been paid to date, and no demand draft or evidence of intent to pay has been submitted by the CD. The proposed settlement amount is significantly lower than the outstanding operational debt, and accepting such an offer would inflict severe financial harm upon the Applicant. Hence, the offer was rejected as lacking bona fides.

The CD filed its Brief Synopsis dated 16.07.2025, which has since been considered.

The CD reiterated its stance as stated in its Reply dated 11.06.2025.

We have perused the documents as placed before us and heard both the Ld. Counsels for the Applicant and the CD.

Both parties admit that the Applicant supplied Cold and Hot Roll Coils to the CD pursuant to a quotation and a subsequent Purchase Order, and that invoices amounting to Rs.1,79,21,783/- remain unpaid despite repeated demands.

The invoices raised are from 08.04.2022 till 01.07.2022 and as per the Purchase Order dated 31.03.2022 issued by the CD, attached on Page No. 18 of the Application, payment terms are 30 days and accordingly first date of default is stated in the revised Application as 08.05.2022. This Application has been filed on 07.03.2025 and therefore, the same is within the limitation period.

The NeSL Form D filed by the Applicant reflects the status of authentication of default as “deemed to be authenticated”.

The CD has admitted the receipt of goods; however, it disputes the initiation of insolvency proceedings on the ground that the parties had agreed to resolve disputes exclusively through arbitration in Mumbai, which the Applicant allegedly failed to invoke. The CD also asserts that the impact of the COVID-19 pandemic caused financial difficulties, and that it had requested an extension to repay the dues, which the Applicant ignored, thereby rushing to file the insolvency petition. Furthermore, the CD contends that the Applicant’s true intent is recovery rather than revival, contrary to the purpose of the IBC, and offers a substantially lower amount as full and final settlement.

The existence of an arbitration clause in the Purchase Order does not preclude the filing of an application under Section 9 of the IBC. Judicial precedents, such as the decision cited by the Applicant in Mr. Shahi Md. Karim (supra) establishes that the operational creditor may initiate insolvency proceedings even when an arbitration agreement is present, as the objective of the IBC is resolution rather than mere recovery of dues through traditional dispute resolution mechanisms. Moreover, the Hon’ble Supreme Court in Tata Consultancy Services Ltd. v. Vishal Ghisulal Jain, [Civil Appeal No 3045 of 2020] has categorically held:

The CD’s request for an extension of 6 months to repay the outstanding amount, made in response to the Applicant’s reminder letter, was met with silence according to the Applicant, who points to the lack of any subsequent payment or formal agreement reflecting such extension. The Applicant’s actions in sending a demand notice under the IBC after the CD failed to provide any concrete assurance or payment can be seen as a reasonable and lawful step following the protracted default. The Applicant’s conduct demonstrates an effort to resolve the issue amicably before resorting to insolvency proceedings, which is consistent with the IBC’s mandate to enable timely resolution.

The CD’s offer of Rs.75,00,000/- as full and final settlement against the admitted debt of Rs.1,79,21,783/- has been rejected by the Applicant on grounds of non-fulfilment and lack of bona fide intent, given the absence of any payment or guarantee backing the offer. The Applicant’s refusal to accept this settlement offer (FNF) is justified in light of the large outstanding amount and prior unfulfilled promises by the CD. The operational creditor is permitted under law to reject settlements that are not in its interest, especially when there is no demonstrable good faith or financial assurance from the debtor.

The issue regarding the proper service of the demand notice has been satisfactorily addressed by the Applicant through the submission of evidence showing the CD’s relocation to the new address where the notice was delivered. This dismisses any claim of irregularity in service, thereby affirming compliance with procedural requirements under the IBC. The CD’s contention that the notice was not properly served is therefore without merit and does not vitiate the proceedings.

Overall, the CD’s defense largely rests on procedural technicalities and the pandemic’s economic impact, neither of which pardons it from liability for payment. The IBC’s objective to facilitate resolution rather than mere recovery supports the Applicant’s petition for initiation of the CIRP. The Applicant’s evidence of debt, attempts at amicable settlement, and procedural compliance underpin the Application’s validity. The Applicant has proved that there exists a debt which is in default and the total amount of debt in default exceeds the threshold prescribed u/s 4 of IBC, 2016. We also hold that the required information has been furnished in the Application and all the required documents have been attached therewith, and as such, the Application is complete. Demand Notice has been duly served upon the CD, and there is neither any payment made by the CD nor any notice of dispute raised by the CD. We are, therefore, of the considered view that the present Application is complete in terms of Section 9 of the IBC and deserves to be admitted.

We make it clear that at this stage we have not crystallised the amount as claimed in this Application; the same is left to be collated by the IRP.

In view of the aforesaid findings, this Application being C.P. (IB) 444/MB/2025 filed under Section 9 of IBC, 2016 by Vyash Vanijya Private Limited, the OC, for initiating CIRP in respect of Kaved Steel Products Private Limited, the CD, is admitted.

We further declare a moratorium under Section 14 of IBC, 2016 with consequential directions as mentioned below:

I. We prohibit:

II. That the supply of essential goods or services to the CD, if continuing, shall not be terminated or suspended or interrupted during the moratorium period.

III. That the order of moratorium shall have effect from the date of this order till the completion of the CIRP or until this Tribunal approves the resolution plan under Section 31(1) of the IBC or passes an order for the liquidation of the CD under Section 33 thereof, as the case may be.

IV. That the public announcement of the CIRP shall be made in immediately as specified under Section 13 of the IBC read with Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

V. Perusal of the IBBI website reveals that the AFA of the proposed IRP, Mr. Vishnu Kant Kabra is no longer valid. In view of the same and in the interest of justice, this Bench hereby appoints Mr. Arihant Nenawati, having Registration No. as IBBI/IPA-001/IP-P00456/2017-18/10799 and e-mail ID [email protected], having valid Authorisation for Assignment up to 31.12.2025, from the panel of as provided by the IBBI, as the IRP in this matter.

VI. That the fee payable to IRP/RP shall be in accordance with such Regulations/Circulars/ Directions as may be issued by the IBBI.

VII. That during the CIRP Period, the management of the CD shall vest in the IRP or, as the case may be, the RP in terms of Section 17 or Section 25, as the case may be, of the IBC. The officers and managers of the CD are directed to provide effective assistance to the IRP as and when he takes charge of the assets and management of the CD. Coercive steps will follow against them under the provisions of the IBC read with Rule 11 of the NCLT Rules, 2016 for any violation of the law.

VIII. That the IRP/IP shall submit to this Tribunal periodical reports with regard to the progress of the CIRP in respect of the CD.

IX. In exercise of the powers under Rule 11 of the NCLT Rules, 2016, the OC is directed to deposit a sum of Rs.3,00,000/- (Three Lakh Rupees) with the IRP to meet the initial CIRP cost arising out of issuing public notice and inviting claims, etc. The amount so deposited shall be interim finance and paid back to the OC on priority upon the funds becoming available with IRP/RP from the Committee of Creditors (CoC). The expenses incurred by IRP out of this fund are subject to approval by the CoC.

X. A copy of this Order be sent to the Registrar of Companies, Maharashtra, Mumbai for updating the Master Data of the Corporate Debtor.

XI. A copy of the Order shall also be forwarded to the IBBI for record and dissemination on their website.

XII. The Registry is directed to immediately communicate this Order to the OC, the CD and the IRP by way of Speed Post, e-mail and WhatsApp.

XIII. Compliance report of the order by Designated Registrar is to be submitted today.