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Judgment
ORDER
[PER: BENCH]
1. BACKGROUND
This is an Application bearing C.P. (IB) No.224/MB/2025 filed on 03.12.2024 by Mr. Mangal Yadav, the Applicant (Operational Creditor) under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code”) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as “the AAA Rules”), for initiating Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) in respect of M/s Vicotex Fabrics Private Limited, the Corporate Debtor (CD). The said Application has been filed through Mr. Nitish Bangera, Practicising Company Secretary, authorised by Authority Letter dated 03.12.2024 attached on page no.42 and 44 of the Application to accept service of process on behalf of the Applicant. Another authority letter of the said date has been attached on page nos. 39 and 41 authorising Mr. Nitesh Bangera to issue notice, act, appear and plead on behalf of the Applicant.
The Applicant is engaged in the supply of agro products, focusing on providing high-quality agricultural goods such as fresh fruits, vegetables, and fertilizers. The CD is engaged in the business of textiles and agro products.
As per Part-IV of the Application the total amount claimed to be in default is Rs.1,35,96,337/- (One Crore Thirty-Five Lakh Ninety-Six Thousand Three Hundred and Thirty-Seven Rupees) including principal amounting Rs. 1,23,75,000/- and the balance amount towards interest calculated at the rate of 18% p.a.
The date of default is mentioned as 22.04.2024 being the due date for the last invoice.
2. AVERMENTS OF THE APPLICANT
The Applicant had raised ten Sales invoices on CD from 05.09.2023 to 23.03.2024 for supply of agro product amounting to Rs.1,23,75,000/-. The copies of the sale invoices are attached on page nos. 49 to 58 of the Application. The invoices specifically mention the payment terms as 30 days of invoice and interest will be charged at 18% p.a. for delayed payment.
The Applicant sent reminder letter dated 15.05.2024 to the CD for outstanding payment. The copy of the reminder letter is at Exhibit-4.
Further, a legal notice dated 20.06.2024 was sent by the Applicant to the CD for payment of the outstanding amount. The Legal Notice was hand delivered to the CD and the acknowledgement is made on the legal notice itself. The copy of the legal notice is on page no. 60.
The Applicant issued a Demand Notice dated 12.07.2024 in Form 3 demanding payment of the outstanding amount of Rs.1,35,96,337/- (including principal and interest) and the same is annexed on page nos. 45-47.
It is claimed that the CD had replied to the Demand Notice on 10.08.2024. The copy of the reply is at page no. 61.
The Applicant has relied on MCA data of the CD annexed at page nos. 62-63.
The Application had defects such as there was no proof of delivery of the demand notice upon the CD, the reply by the CD to the demand notice was not proved as it was not clear as to whether the reply dated 10.08.2024 was in response to the demand notice raised by the Applicant and there was no NeSL record of default appended to the Application. Therefore, the Tribunal vide order dated 05.05.2025 directed the Applicant to remove the defects in terms of proviso to Section 9(5) of the Code. The Applicant in compliance filed an Additional Affidavit dated 28.05.2025. The Applicant has attached the dasti acknowledgment of the demand notice by the CD, an email dated 13.05.2025 requesting the NeSL for completion of verification process for generating Form-D, Memorandum of Appearance dated 28.05.2025 in favor of the Ld. CS appearing for the Applicant in the matter and a copy of Hon’ble Supreme Court judgment in Vijay Kumar Singhania vs. Bank of Baroda, (2024) ibclaw.in 197 SC. The same was served to the CD.
The CD had proposed OTS for a sum of Rs. 70 lakhs and were willing to enhance the settlement amount.
3. CONTENTIONS OF CORPORATE DEBTOR
The CD filed Affidavit-in-Reply on 01.04.2025. The same was affirmed by Mr. Arvindkumar Poonamchand Agarwal – Director and Authorised Representative of the CD on 26.03.2025.
It is stated that the CD has been hit by the Covid-19 pandemic and the economic fall-out brought by it was a major setback for the CD. The CD has under gone significant pressure, disruptions in access to materials, staff and operations which had severely impacted the operational continuity, financial health and workforce of the CD company.
The Covid-19 pandemic had sent shock waves which triggered and worsened some pre-existing fragilities faced by the CD. The CD was already burdened with unsustainable debt levels prior to the crisis and was ill-prepared to withstand an income shock of that scale.
The CD admitted that due to the poor financial health of the CD it is unable to discharge the total dues owed to the Applicant amounting to Rs.1,35,96,337/-.
The CD had approached the Applicant with settlement proposal after the knowledge of the present Application filed by the Applicant. The CD offered a sum of Rs. 40 lakhs to the Applicant as a one-time settlement (OTS) amount but the Applicant had declined the same. The CD admits that it is struggling with huge financial crises and the Applicant is using the IBC as recovery tool to pressurise the CD to recover the money.
The CD sent an email dated 13.03.2025 proposing for an amicable settlement of the subject matter at lumpsum of Rs. 40 lakhs, which is annexed at Exhibit-A of the Reply. The Applicant replied to the above email on 19.03.2025 declining the proposed settlement amount of Rs. 40 lakhs and the email is annexed at Exhibit-B.
The CD in its reply affidavit at Para 13 has stated as under, “that therefore, this Reply has been preferred by the Respondent humbly submitting that the CD is not in the financial position to repay the outstanding dues owed to the Petitioner, in view of which, it is humbly prayed that the Hon’ble Tribunal may graciously admit the subject Petition bearing C.P. (IB) No. 224/2025 as filed by the Petitioner”.
4. ANALYSIS AND FINDINGS
We have heard the both the Ld. Counsels and have perused the records as placed before us. Our findings in the matter are as under: -
The Applicant has placed on record copies of relevant tax invoices dated 05.09.2023, 18.09.2023, 03.10.2023, 14.10.2023, 07.11.2023, 15.11.2023, 02.12.2023, 11.01.2024, 20.02.2024 and 23.03.2024, correspondences with the Corporate Debtor, reminder letter dated 15.05.2024 and legal notice dated 20.06.2024.
On perusal of the tax invoices it is observed that the Applicant had supplied agro products to the CD amounting to Rs. 1,23,75,000/-. As per the terms of the invoices the payment was to be made within 30 days from the date of invoice. If the balance was due within 30 days of invoice then 18% p.a. interest was applicable thereafter, as is stated in all the tax invoices.
The first invoice was raised by the Applicant on the CD on 05.09.2023 which fell due on 05.10.2023. The last invoice was raised by the Applicant on the CD on 23.03.2024 which fell due on 22.04.2024. On the due dates mentioned above, the CD had failed to make payments and therefore, the delay interest was applicable to the invoice amounts at 18% p.a. which amounted to Rs. 12,21,337/- (calculated till 11.07.2024) and the principal amount outstanding is more than Rs. 1 (One) crore i.e. Rs.1,23,75,000/-. The total outstanding operational debt payable by the CD was Rs.1,35,96,337/-as claimed by the Applicant in Part-IV of the Application.
The Applicant had requested the CD to make the payment of the outstanding amount vide letter dated 15.05.2024 within 10 days. The CD failed to make the outstanding payment. Despite multiple reminders by the Applicant to make the outstanding payments, the CD failed to make the payments. The Applicant issued a legal notice dated 20.06.2024 demanding the outstanding payment. Thereafter, the Applicant issued a Demand Notice dated 12.07.2024 to the CD under Section 8 of the Code in the prescribed form demanding the payment of the outstanding debt amount of Rs.1,35,96,337/-. The CD vide email dated 10.08.2024 acknowledged the outstanding amount and stated that it is unable to make the payment due to financial situation. Hence, we find that the CD defaulted in payment of the operational debt owed to the Applicant.
It is observed from the record that the date of default is explicitly stated in Part-IV of the Application as 22.04.2024 i.e. the due date for the last invoice. Therefore, it is clarified as to how the Applicant has claimed the date of default as 22.04.2024.
On perusal of the material available on record, we find that there is nothing to show that any dispute existed between the parties before the issuance of the Demand Notice. The Applicant has filed an Affidavit under Section 9(3)(b) of the Code. Hence, it clearly emerges that there is no pre-existing dispute between the parties regarding the amount of operational debt in default.
The CD has raised the contentions that it is unable to make the payment of the outstanding amount due to Covid-19 pandemic and that had led to financial crunch in the CD’s company. The CD has prayed to admit the present Application due to the above financial status of the CD. The Ld. Counsel for the CD had made a statement which is recorded in Para 3 of the order dated 05.05.2025 of this Tribunal as follows, “the CD have given OTS proposal to the Applicant herein, which was for a sum of Rs. 70,00,000/- and their clients are willing to enhance the said settlement amount”. The above settlement was not reported and the matter was heard and reserved.
There is no NeSL record of default annexed to the Application as stated by the Applicant. The Applicant relied on the Hon’ble Supreme Court judgment in Vijay Kumar Singhania vs. Bank of Baroda (2024) ibclaw.in 197 SC where it was held that “the filing a record of default with an Information Utility (IU) like NeSL is not mandatory for initiating proceedings under Section 9 of the IBC. This means that creditors can rely on other forms of evidence to prove default when filing such applications”.
The Applicant has proposed the name of Mr. Chhotulal Rawa Bhagwat to act as the Interim Resolution Professional (IRP) and given his declaration in Form 2, inter alia, stating that no disciplinary proceeding is pending against him. On accessing the IBBI website we see that the AFA of the IRP is valid till 31.12.2025.
From the above discussions, it is evident that there was proof of default of debt on the part of the CD in the payment of undisputed operational debt to the Applicant exceeding Rs.1,00,00,000/- (One Crore Rupees), being the threshold monetary limit under Section 4 of the Code prevailing on the date of filing of the present Application. Thus, this Application under Section 9 of the Code preferred by the Applicant is found to be maintainable. The Application is complete and has been filed in the prescribed form.
In view of the above, we find that requisite conditions necessary to trigger CIRP in respect of the CD are fulfilled and the matter needs to be admitted under Section 9(5)(i) of the Code.
ORDER
In view of the aforesaid findings, Application bearing C.P.(IB) No.224/MB/2025 filed under Section 9 of the Code by Mr. Mangal Yadav, the Applicant, for initiating CIRP in respect of Vicotex Fabrics Private Limited, the Corporate Debtor is hereby admitted.
We further declare moratorium under Section 14 of the Code with consequential directions as mentioned below: -
I. We prohibit-
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;
transferring, encumbering, alienating or disposing of by the Corporate Debtor 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 Corporate Debtor in respect of its property including any action under the Securitisation 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 possession of the Corporate Debtor.
II. That the supply of essential goods or services to the Corporate Debtor, 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 Code or passes an order for the liquidation of the Corporate Debtor 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 Code read with Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and other Rules and Regulations made thereunder.
V. That this Bench hereby appoints Mr. Chhotulal Rawa Bhagwat, a registered Insolvency Professional having Registration Number IBBI/IPA-002/IP-N01238/2022-2023/14241 and e-mail address crbhagwatcs@rediffmail.com having valid Authorisation for Assignment up to 31.12.2025 as the IRP to carry out the functions under the Code.
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 Corporate Debtor 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 Code. The officers and managers of the Corporate Debtor the Corporate Debtor is directed to provide effective assistance to the IRP as and when he takes charge of the assets and management of the Corporate Debtor. 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/RP within a period of one week from the date of receipt of this Order and shall not commit any offence punishable under Chapter VII of Part II of the Code. Coercive steps will follow against them under the provisions of the Code read with Rule 11 of the NCLT Rules for any violation of 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 Corporate Debtor.
IX. In exercise of the powers under Rule 11 of the NCLT Rules, 2016, the Applicant is directed to deposit a sum of Rs.3,00,000/- (Rupees Three Lakh) 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 Applicant on priority upon the funds 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 Applicant, the Corporate Debtor 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.