Mahavir Industrial Corporation vs M/s Hindustan Controls & Equipment Pvt. Ltd.

Per: Harish Chander Suri, Member (Technical)

The Court is convened by video conference today.

This petition under 9 of the Insolvency and Bankruptcy Code, 2016 read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules,2016 has been filed by Mahavir Industrial Corporation, through its partner and Power of Attorney holder namely Mr. Hanuman Prasad Chharia , (hereinafter referred as the Operational Creditor), seeking initiation of corporate insolvency resolution process in respect of M/s Hindustan Controls & Equipment Pvt. Ltd., CIN: 51109WB2000PTC091319 having its registered office P-16, Kasba Industrial Estate, Phase-I, Kolkata-700107, (hereinafter referred as the Corporate Debtor).

It is submitted in the petition that the Operational Creditor is an unregistered partnership firm engaged in the business of manufacturing and supplying of Electrical goods and allied products. During the period 2010 to 2011, time to time the Corporate Debtor purchased diverse electrical and mechanical goods for which invoices were also raised. Copy of the said invoices is annexed as Annexure-C Colly.

It is submitted that a sum of Rs.41,43,217.12 fell due from the Corporate Debtor and the Operational Creditor served a notice under Section 434 of the Companies Act, 1956 dated April 24, 2013. Since the Corporate Debtor failed to pay its debt of Rs.41,43,217.12 on July 23, 2013, the Operational Creditor instituted a winding up proceeding before the Hon’ble High Court at Calcutta, against the Corporate Debtor being C.P. No. 516/2013. By an order dated January 28, 2014 the Hon’ble Court admitted the winding up petition upon consent of the parties for a total sum of Rs.42 lakhs and the Corporate Debtor was directed to pay Rs. 1 Lakh per month for 42 succeeding months and first of such instalments was directed to be paid by February 10,2014 and the 10^th day of each succeeding month. The Hon’ble Court further directed that in default of any two instalments, the Operational Creditor would be entitled to interest as claimed in the winding up petition. Copy of the said order dated January 28, 2014 is annexed as Annexure-D.

It is submitted that pursuant to the order of the Hon’ble High Court dated January 28, 2014, the Corporate Debtor paid its first instalment on February 17,2014 of Rs. 1 Lakh by way of cheque dated February 10, 2014 vide a forwarding letter of Ld. Advocate dated February 17,2014 wherein and/or whereunder the Corporate Debtor undertook to comply with the said order dated January 17,2014 and to pay further instalments accordingly. Copy of the said letter dated February 17, 2014 is annexed as Annexure-E.

Subsequently, the Corporate Debtor paid ten instalments of Rs.1 lakh each totaling up to Rs.10 lakhs and suddenly stopped payment of the monthly instalments to the Operational Creditor. The last of such instalment payable on November,2014 was paid on April 14, 2015. Thereafter, the Operational Creditor by letters dated November 17, 2014 and February 11,2015 demanded payment of the monthly instalments but the Corporate Debtor failed and neglected to do so. Copies of the letters dated November 17,2014 and February 11,2015 are annexed as Annexure-F.

It is submitted that the Operational Creditor through its Ld. Advocate by letter dated July 21, 2015 demanded the Corporate Debtor a sum of Rs. 32 lakhs along with interest in terms of the order dated January 28,2014. The Corporate Debtor by letter dated September 28,2015 further admitted its dues and pleaded some respite as the Corporate Debtor was facing financial crisis. Copies of the letters dated July 21, 2015 and September 28,2015 is annexed as Annexure-G.

It is submitted that on or about August,2016 the Operational Creditor made an application being C.A. No. 634 of 2016 in C.P. 516 of 2013 praying inter alia, for appropriate directions being given for publication in the newspapers for proceeding with liquidation proceeding . The said application was heard by the Hon’ble Court on November 21, 2016 wherein it was submitted before the Hon’ble Court by the Ld. Counsel appearing on behalf of the Corporate Debtor that the company is likely to receive a sum of Rs.13 Crore within two weeks from date and would be in a position to repay the entire amount payable under the order dated January 28,2014. The Hon’ble Justice Soumen Sen after hearing the submissions /admission of the Ld. Advocate on behalf of the Corporate Debtor was pleased to dispose of the said application by extending the time to pay the entire amount payable under the order dated January 28, 2014 within three weeks from date. In default the said petition will be advertised once in ‘The Stateman’ and once in ‘Aajkal’. Copy of the said order dated November 21,2016 is annexed as Annexure-H.

It is submitted that despite order of the Hon’ble High Court at Calcutta, the Corporate Debtor failed and neglected to pay its admitted dues. By letter dated December 7,2016, the Corporate Debtor admitted its dues and further requested the Operational Creditor to keep in abeyance the execution of the order dated November 21, 2016 inasmuch as they had all bonafide intention to pay their dues but were suffering from financial crisis. Copy of the said letter dated December 7,2016 is annexed as Annexure-I.

Since the Corporate Debtor defaulted in making payment, the Operational payment, the Operational Creditor on September 15, 2018 sent demand notices in Form 3 to the Corporate Debtor. The said demand notices were duly served on the Corporate Debtor on September 18, 2018 and its Directors on September 20, 2018. Copies of the Demand Notices and acknowledgement Due Cards are annexed as Annexure-J.

It is submitted that the Corporate Debtor by letter dated September 24, 2018 replied to the same by making false and untrue statements. Copy of the reply dated September 24, 2018 is annexed as Annexure-K. By letter dated November 1,2018, the Operational Creditor refuted the allegations made in the letter dated September 24, 2018. The Corporate Debtor further by letter dated December 8,2018 made false and frivolous allegations. Copies of the letters dated November 1, 2018 and December 8, 2018 are annexed as Annexure-L.

It is submitted that a sum of Rs. 31,43,217/- is due along with interest @ 18% per annum till the date of payment. The amount fall due on November, 2014 and thereafter on December, 2016 (Working sheet for computation of the amount and the date of default in tabular form is annexed as Annexure-M.

The Operational Creditor further submitted that vide order dated January 28, 2014 in C.P. No. 516 of 2013 passed by Honble Justice Patherya and vide order dated November 21, 2016 in C.A. No. 634 of 2016 arising out of C.P. No. 516 passed by Hon’ble Justice Soumen Sen.

The Operational Creditor i.e. partnership firm has filed Power of Attorney by Sri Sanjeev Chharia & Smt. Kavita Chharia partners of Mahavir Industrial Corporation, the Operational Creditor appointing one of its partners Sri Hanuman Prasad Chharia as their Constituted Attorney of the partnership firm M/s Mahavir Industrial Corporation for filing the case before the High Courts ,Hon’ble NCLAT and NCLT of and all courts throughout India.

The Operational Creditor has filed an affidavit under section 9 (3)(b) of one of its partners namely Hanuman Prasad Chharia, wherein it is submitted that during the period 2010-2011, the Corporate Debtor purchased goods from the applicant/operational creditor and also raised tax invoices. The Operational Creditor served as notice on 24.04.2013 under Section 434 of the Companies Act, 1956 on Corporate Debtor as a sum of Rs.41,43,217.12 fell due.

It is submitted that on 23.07.2013, the winding up proceedings were instituted before the Hon’ble High Court at Calcutta as the Corporate Debtor failed to pay Rs.41,43,217/-. By an order dated 28.01.2014, the Hon’ble Court recorded that the Corporate Debtor has agreed to make payment inclusive of interest aggregating to Rs.42,00,000/- and the Hon’ble Court directed the Corporate Debtor to pay Rs.1,00,000/- per month for 42 succeeding months and in default of payment of any two instalments, the Operational Creditor will be entitled to interest as claimed in the winding up petition. Pursuant to the order of the Hon’ble High Court at Calcutta last instalment was paid on 04.04.2015 ( Instalment for November, 2014).

It is submitted that the Operational Creditor by letters/notices of diverse dates demanded the remaining monthly insalments but the Corporate Debtor failed and neglected to pay the same. The Operational Creditor by its Ld. Advocates letter demanded a sum of Rs.32 Lakhs along with interest from Corporate Debtor in terms of the order of the Hon’ble High Court at Calcutta.

The Corporate Debtor admitted its liability but expressed its inability to pay the outstanding due to financial crisis.

It is submitted that the Operational Creditor filed an application before the Hon’ble High Court at Calcutta, being CA No. 634 of 2016 in CP No. 516 of 2013 and prayed necessary orders in terms of the order dated 28.01.2014.

It is submitted that on 21.11.2016, the Hon’ble Court upon the submissions made on behalf of the Corporate Debtor that the Corporate Debtor is likely to receive a sum of Rs.13 crores within two weeks from date and would be in a position to repay the entire amount payable under the order dated 28.01.2014 was pleased to dispose of the said application by extending the time to pay the entire amount payable under the order dated 28.01.2014 within three weeks from date. The Hon’ble Court further directed that in default, the petition will be advertised in newspapers. The Corporate Debtor by a letter dated 07/12/2016 admitted its dues and requested the Operational Creditor to keep the execution of the order dated 21.11.2016 in abeyance as it was facing financial crisis.

Since no payment was made by the Corporate Debtor despite its admissions to pay the same, the Operational Creditor sent a demand notice to the Corporate Debtor on 15.09.2018. The demand notice to the Corporate Debtor on 15.09.2018.The demand notices were duly served on the Corporate Debtor and its Directors. On 24.09.2018 by a letter, the Corporate Debtor replied to the demand notice by making false and undue statements.

It is submitted that after serving statutory notice dated 15.09.2018, the Corporate Debtor despite admitting its dues before the Hon’ble High Court has replied to the same but has not issued any notice relating to dispute of the unpaid debt or has not filed any suit or initiated any arbitration proceeding regarding the statutory notice. It may be noted that before the statutory notice there was no suit or arbitration pending initiated by the Corporate Debtor regarding the subject demand of the Operational Creditor.

It is submitted that the Operational Creditor by letter dated 01.11.2018 refuted the contentions of the letter dated 24.09.2018 of the Corporate Debtor. The Corporate Debtor again by letter dated 08.12.2018 made false and frivolous allegations.

This application under section 9 of the Insolvency and Bankruptcy Code, 2016 was filed on July 19, 2019 before this Adjudicating Authority. Thereafter, from time to time this application was heard and parties have filed their respective affidavits.

It is submitted that by an order dated 10.09.2021, the company petition being CP No. 516 of 2013 was transferred by the Hon’ble High Court at Calcutta to this Adjudicating Authority and the same is registered as TP/3(KB)/2022.

The petition being TP/3(KB) 2022 appeared on 08.03.2022 before this Adjudicating Authority and the said matter was directed to be listed on 23.03.2022 along with C.P.(IB) No. 1256/KB/2019. By an order dated 23.03.2022, This Adjudicating Authority after hearing all the parties inter alia,directed the Operational Creditor to file affidavits under Section 9(3)(b) and 9(3)(c) of the Insolvency and Bankruptcy Code, 2016.

The Operational Creditor has also filed an affidavit under Section 9(3)(c)of the Code through one of its partner Hanuman Prasad Chharia, where in it is stated that despite having admitted that Rs.32 Lakhs was due and payable to the Operational Creditor before the Hon’ble High Court at Calcutta in C.A. No.634 of 2016 arising out of C.P. 516 of 2013 at present registered as TP/3(KB) 2022 as recorded in the order dated 08/03/2022, after having served a statutory notice dated 15/09/2018, the Corporate Debtor replied to the same raising false and frivolous disputes but has not filed any suit or initiated an arbitration proceedings regarding the subject matter of the claim. Even admitting the dues, the Corporate Debtor has not remitted the admitted claim in the bank accounts of the Operational Creditor being account no. 130392 maintained with RBI Bank, Girish Park Branch of Account No. 2611304324 maintained with Kotak Mahindra Bank, Brabourne Road Branch. In this respect, the bank statements of the applicant/Operational Creditor from 15.09.2018 to 09.07.2019 are annexed as letter-A.

In the reply affidavit, filed by the Corporate Debtor through one of its Directors Mr. Suresh Munshani, it is submitted that the allegations made in the present petition are disputed and denied. It is submitted that the application is not maintainable because the Operational Creditor is unregistered partnership firm and the other partners of the Operational Creditor have not been arrayed as parties in the present petition, neither have the purported partner on behalf of the Operational Creditor and therefore, the present application should be dismissed.

It is further submitted that since the Operational Creditor including the name of Mr. Hanuman Prasad Chharia has not been shown in the Register of Firms, the said application is not maintainable in law.

Furthermore, as will be evident from the records, the Company Petition, being C.P. No. 516 of 2013 initiated by the purported partners of the Operational Creditor is still pending before the Hon’ble High Court at Calcutta. The said proceedings were initiated by the purported partners of the Operational Creditor on the basis of the same cause of action, as has been alleged in the instant proceedings. Therefore, since the issue in question has already been raised before the Hon’ble High Court at Calcutta, and since the same is still pending before the said Hon’ble Court, the Operational Creditor could not have raised the same issue before this Adjudicating Authority. In any event, since the proceedings were pending before the Hon’ble High Court at Calcutta relating to the same disputes between the parties even prior to the issuance of the demand notice under the Insolvency and Bankruptcy Code, 2016, the instant proceedings are not maintainable in view of the provisions of the Insolvency and Bankruptcy Code, 2016.

It is submitted that in addition thereto, the Operational Creditors have resorted to Forum shopping, by initiating different proceedings before different Courts of Law on the basis of the same cause of action and/or disputes between the parties, solely for the purpose of harassing the Corporate Debtor and making unjust enrichment at the expense of the same. The Hon’ble Supreme Court of India, in several of its decisions, has deprecated such practice of forum shopping and has held that such proceedings should be nipped in the bud. In view of the same, the Operational Creditor cannot be permitted to take recourse to the provisions of the Insolvency and Bankruptcy Code,2016.

Ld.Counsel for the Corporate Debtor submitted that the Operational Creditor has not abided by and has failed to comply with the necessary requirements as provided and prescribed in the Insolvency and Bankruptcy Code, 2016 read with Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Even otherwise, the instant application is barred by the provisions of the Code, 2016.

It is submitted that the said application does not contain any copy of the certificate from the Financial Institution maintaining accounts of the Operational Creditor and therefore, it has not been confirmed whether the alleged operational debt has remained unpaid or not. The Operational Creditor has not satisfied the requirements under the provisions of sections 9(3)(b) and 9(3)(c) of the Insolvency and Bankruptcy Code, 2016 and therefore, the said application remains incomplete and as such, cannot be take into consideration by this Adjudicating Authority.

It is submitted that the statements made in page nos. 3 to 8 of the said application are matters of record. However, it will be evident from the documents referred to in the aforesaid pages, that the Corporate Debtor had never acknowledged the dues of the Corporate Debtor. Even assuming without admitting that the Corporate Debtor had acknowledged its dues, the Corporate Debtor has made subsequent payments and has fully repaid its purported dues towards the Operational Creditor. Even otherwise, the Operational Creditor does not have any live claim against the Corporate Debtor and the purported claim of the Operational is hopelessly barred by the laws of limitation. Evan a bare perusal of the invoices were raised on 2011-2012 and therefore, there cannot be any iota of doubt that the purported claim is barred by the laws of limitation.

It is submitted that none of the invoices raised by the Operational Creditor was ever received by the Corporate Debtor and in fact, none of the invoices bear any signature, stamp /or seal of the Corporate Debtor.

It is submitted that the statements made by the Corporate Debtor in its letters dated 24^th September, 2018 and 8^th December, 2018 are true and correct and all the allegations contrary thereto are absolutely false and incorrect. In fact, the contents of the purported demand notice dated 15^th September, 2018 are incorrect and false to the knowledge of the operational creditor and/or its purported partners.

It is submitted that the purported working for computation of amount annexed to the said application as Annexure-M are grossly wrong and contains astronomical figures, which in any event, have not been supported by any documentary evidence.

It is submitted that there is no operational debt due and payable by the Corporate Debtor to the Operational Creditor and as such no proceedings is maintainable under section 9 of the Code and that no Operational debt has been proved to have been due by the Corporate Debtor.

It is submitted that the instant purported application is a gross abuse of the process of law. Therefore, since the instant application is incomplete and in any event, misconceived, the same fail and deserves to be rejected by this Adjudicating Authority.

In the Rejoinder affidavit filed by the Operational Creditor, it is submitted that the deponent Hanuman Prasad Chharia is one of the authorised partners of Mahavir Industrial Corporation. It is submitted that all the allegations contained in the reply affidavit are denied. It is denied that the application is not maintainable or that the Operational Creditor, who is represented through its partner cannot enforce its purported rights under the Code or that the application is barred by time. It is denied that the Company petition C.P.No. 516 of 2013 is pending before the Hon’ble High Court at Calcutta as alleged or at all. It is categorically denied that the proceedings were initiated before the Hon’ble High Court on the basis of the same cause of action as has been alleged in the instant proceedings and the issue in question having been already raised before the Hon’ble High Court at Calcutta, the Operational Creditor could not have raised the same issue before this Adjudicating Authority. It is denied that since the proceedings were pending before the Hon’ble High Court at Calcutta relating to the same disputes between the parties even prior to the issuance of demand notice under the Code, the instant proceedings are not maintainable in view of the provisions of the Code. It is submitted that in order dated 28^th January, 2014, the Hon’be Justice Patherya recorded terms of settlement whereby the corporate debtor agreed to pay the Operational creditor a sum of Rs.42 Lakhs inclusive of interest which the operational creditor has agreed to accept in instalments of Rs. 1 lakh per month. Pursuant to the order of the Hon’ble High Court, ten instalments were paid of Rs.One Lakh each amounting to Rs. 10 Lakhs against the total settled amount of Rs. 42 lakhs. It is denied that the Operational Creditor has resorted to forum shopping by initiating different proceedings before the different courts of law on the basis of the self-same cause of action or disputes between the parties solely for the purpose of harassing the corporate debtor or to make unjust enrichment at the expense of the same as alleged or at all. It is submitted that the allegations of forum shopping by the corporate debtor is baseless, far-fetched, misleading, fanciful, frivolous and intended to avoid payment to the operational creditor. It is submitted that the decisions of the Hon’ble Supreme Court of India as vaguely referred to by the deponent are not applicable to the instant case and as such the allegation that the Operational Creditor cannot be permitted to take recourse to the provisions of the Code are baseless. It is denied and disputed that the Operational Creditor has not abided by or has failed to comply with the necessary requirements a provided and prescribed by the Insolvency and Bankruptcy Code, 2016 read with the Insolvency and Bankruptcy ( Application to Adjudicating Authority) Rules, 2016 as alleged. It is denied and disputed that the Operational Creditor has not satisfied the requirements under the provisions of Section 9(3)(b) and 9(3)c)of the Code or that the application remains incomplete and cannot be taken into consideration by this Adjudicating Authority.

The Operational Creditor has further denied all the allegations made in further paragraphs of the reply affidavit and the Operational Creditor has reiterated and reaffirmed corresponding paragraphs of the petition.

It is denied by the Operational Creditor that no operational debt is due or payable by the Corporate Debtor to the Operational Creditor or that the proceedings are not maintainable under section 9 of the Code.

In the present case, it is clear from the aforesaid facts that the Corporate Debtor had admitted its liability and had agreed to pay Rs.1,00,000/- per month for 42 months in the proceeding filed before the Hon’ble High Court of Calcutta. The Corporate Debtor, however failed and committed default in payment of the instalments.

Even in the reply to the notice under section 8 of Code served on the Corporate Debtor by the Operational Creditor, the Corporate Debtor could not give any notice relating to any dispute as regards the unpaid debt or any suit having been filed or Arbitration Proceedings regarding the said claim of the Operational Creditor.

Even, though the Corporate Debtor has taken the ground that the claim of the Operational Creditor is barred by time but if we examine the matter, we will see that the Hon’ble High Court of Calcutta vide its order dated 21^st November, 2016 had allowed the prayer of the Operational Creditor in the said petition ( CA(IB) No. 634/2016 with CP No. 516/2013) recording therein that the Company (Corporate Debtor herein) is likely to receive sum of Rs.13 Crore within two weeks from the date and would be in a position to repay the entire amount payable under the order dated 28^th January, 2014. The said order is reproduced as under:-

Since the Corporate Debtor had sought orders from the Hon’ble High Court for making repayment of the loan which was passed on 21^st November, 2016, and the present petition having been filed on 19^th July, 2019, this petition is very much within time.

After going through all the records, we are convinced that the Operational Creditor has proved its case without any doubt.

Since the petition is otherwise complete in all respects.

We, therefore, pass the following orders:-

ii) We hereby declare a moratorium and public announcement in accordance with Sections 13 and 15 of the I & B Code, 2016.

iii) Moratorium is declared for the purposes referred to in Section 14 of the Insolvency & Bankruptcy Code, 2016. The I.R.P. shall cause a public announcement of the initiation of Corporate Insolvency Resolution Process and call for the submission of claims under Section 15. The public announcement referred to in clause (b) of sub-section (1) of Section 15 of Insolvency & Bankruptcy Code, 2016 shall be made immediately.

iv) Moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 prohibits the following:

vi) 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.

vii) The order of moratorium shall have effect from the date of admission till the completion of the corporate insolvency resolution process.

viii) 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 the 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.

ix) The Operational Creditor has not proposed name of any Insolvency Resolution Professional. Therefore, as per the provisions of Section 16(3) (a) of the IBC, so, we appoint Mr. Subodh Kumar Agrawal, IRP having Reg. No. IBBI/IPA-001/IP-P00087/2017-18/10183., email ID [email protected] as Interim Resolution Professional (IRP). He shall file Form-2, and that no disciplinary proceedings are pending against him with the Board.

xi) The Interim Resolution Professional should convene a meeting of the Committee of Creditors and submit the resolution passed by the Committee of Creditors and shall identify the prospective Resolution Applicant within 105 days from the insolvency commencement date.

xii) The Operational Creditor/Applicant is directed to deposit Rs. 2,00,000/- (Rupees Two Lakh only ) with the IRP appointed hereinabove within three days from this order. IRP can claim the preliminary expenses and fees subject to the approval by the CoC and after constitution of CoC.

Registry is hereby directed to communicate the order to the Operational Creditor, the Corporate Debtor, the I.R.P. and the jurisdictional Registrar of Companies by Speed Post as well as through email.

List the matter on 22/08/2022 for filing of Progress Report.

Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities.