Shethia Erector's And Material Handlers Private Limited vs LSML Private Limited

Per: SAMEER KAKAR, MEMBER (TECHNICAL)

Under Adjudication is CP/IB/25/CHE/2022 which has been filed by Shethia Erector’s and Material Handlers Limited (hereinafter referred to as 'Operational Creditor') under Section 9 of the Insolvency & Bankruptcy Code 2016 (in short, 'I&B Code, 2016') r/w Rule 6 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 against LSML Private Limited (hereinafter referred to as 'Corporate Debtor'). The prayer made is to admit the Application, to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor, declare moratorium and appoint Interim Resolution Professional (IRP).

Part-I of the Application sets out about the Operational Creditor from which, it is evident that the Operational Creditor is a Public Company Limited by shares which was incorporated under the Companies Act, 1956 on 22.06.1989 with CIN No: U99999MH1989PLC052323. The Affidavit verifying the application is placed at Page No- 221 of the Application typeset and one Mr. Amarnath Singh, has sworn the Affidavit as the authorized representative of the Operational Creditor. The said Board Resolution authorizing Mr. Amarnath Singh is placed as "Annexure-II-3' of the Application typeset

Part-II of the Application gives all the particulars of the Corporate Debtor from which it is evident that the Corporate Debtor is a Private Company with CIN: U31101TN2007PTC061993 and was incorporated on 10.01.2007 under the Companies Act, 1956. The Registered Office of the Corporate Debtor as per the Application is stated to be situated at No.337, 8th Main Road, MIG Phase I Nolombur, Mogappair West Chennai-600 037. From Part III of the application, it is seen that the Operational Creditor has not proposed the name of the “Interim Resolution Professional” and left it to the discretion of this Tribunal to appoint the same.

From Part-IV of the Application, it is seen that a total sum of Rs.1,30,80,054/- (Rupees One Crore Thirty Lakhs Eighty Thousand and Fifty Four) is being claimed by the Operational Creditor as the Operational debt including applicable taxes plus Rs.1,16,31,786/- (Rupees One Crore Sixteen Lakh Thirty One Thousand Seven Hundred and Eighty Six) towards interest calculated at 18% per annum. In Part IV of the Application, the Operational Creditor has mentioned the date of default to be 30 days from the due date of the respective invoices and the same is placed as “Annexure II-15”.

Part – V of the Application discloses about the details of the documents which have been filed by the Operational Creditor in order to prove the ‘Operational debt’, which are extracted as follows;

It is submitted by the Ld. Counsel for the Applicant that the Applicant was in the business of supplying cranes for lifting of heavy equipment and the Corporate Debtor had engaged the Operational creditor under various work orders. The same is reproduced hereunder:

Further, the outstanding tax invoices as per the work orders mentioned supra and the copies of the payment wise reconciliation table is placed as Annexure- II 5 COLLY in the Application typeset.

The Ld. Counsel for Operational Creditor submitted that, despite availing the services till the extended period of 26.06.2017, the Corporate Debtor failed to clear the outstanding payments. Further it is stated that the Operational Creditor had fulfilled the terms of the invoice and the same had been acknowledged by the Corporate Debtor by admitting the liability of payment vide email dated 27.06.2017 and the said e-mail copy is attached as "Annexure-II-6 COLLY".

The Ld. Counsel for the Operational Creditor submitted that various emails were sent by the Operational Creditor to the Corporate Debtor for repayment of outstanding dues. For the same the Corporate Debtor has responded vide mail dated 15.06.2019 stating that part-payment of Rs.27,58,694/- was made through direct vendor payment to the Operational Creditor dated 21.06.2019.

The Ld. Counsel for the Operational Creditor submitted that even prior to the issuance of the statutory demand notice Form III, dated 17.07.2021, the Operational Creditor had issued a initial demand notice dated 24.01.2020 to the Corporate Debtor requesting to settle the outstanding dues. Further it is submitted that after sending various reminder emails the Corporate Debtor responded through email dated 17.02.2020 and agreed to repayment of the outstanding dues and also sent a payment schedule. The same is placed as "Annexure II-10" of the Application typeset

Subsequently, the Ld. Counsel for the Operational Creditor submitted that part payments were made by the Corporate Debtor after the reconciliation talks and part payments made through direct payment method and the same can be seen from page no 193 of the Application typeset and the same is extracted below.

The Applicant submitted that after 04.08.2020 no payments were received by the Operational Creditor from the Corporate Debtor.

The Ld. Counsel for the Operational Creditor submitted that the Statutory Demand Notice Under Form-III dated 17.07.2021 was sent by the Operational Creditor to the Corporate Debtor claiming a sum of Rs.1,30,80,054/- (Rupees One crore thirty lakhs eighty thousand and fifty-four) including interest, to which there was no reply by the Corporate Debtor. The Affidavit as mandated under Section 9(3)(b) of IBC, 2016 is filed by the Operational Creditor stating that Corporate Debtor has failed to repay the outstanding debt and also there exist no dispute between the parties. The said Affidavit is appended at Pages 214-217 of the Application typeset

Further, it is submitted that Corporate Debtor has deducted TDS during the Financial years of 2016-17 and 2017-18 against the actual invoices without making the actual payment to the Operational Creditor. The Operational Creditor has annexed FORM 26AS in the Application typeset as “Annexure- II-13”. Under the said circumstances, the Learned Counsel for the Operational Creditor submitted that the debt and default on the part of the Corporate Debtor is proved and hence prayed for initiation of CIRP in respect of the Corporate Debtor.

In relation to Corporate Debtor, it is seen from the record of proceedings that the Corporate Debtor was set ex-parte by the virtue of this Tribunal order dated 11.04.2022. Thereafter, the Corporate Debtor/ Respondents has filed IA/987/(CHE)/2022 for setting aside the said ex-parte order and this Tribunal vide its order dated 15.09.2022 has dismissed the said Application for a delay of 483 days in filing the set-aside petition. Under the said circumstance this Tribunal is constrained to proceed with this present Application keeping in mind IBC, 2016 is a time bound process.

Heard the submissions made by the Ld. Counsel for the Applicant and perused the pleadings and documents placed on record. From the arguments made by the Learned Counsel for the Operational Creditor and also upon perusing the documents placed on record, it is seen that the Corporate Debtor vide its email dated 27.01.2017 has acknowledged that amount is due and payable by the Corporate Debtor and also stated that they will clear the payment at the earliest. However, it is seen that the Corporate Debtor has failed to repay the said amount which is due and payable to the Operational Creditor. The said mail is extracted below for reference:-

It is also seen from the records of the proceedings that the settlement talks were prevalent between the Operational Creditor and the Corporate Debtor however the same could not fructify. Part payments had been made by the Corporate Debtor to the Operational Creditor on 21.06.2019 and 31.03.2020 for Rs.27,58,694/- and Rs.50,00,000/- respectively which goes on to show that the Corporate Debtor has admitted its 'debt' and consequent 'default' in repayment of the operational debt. Further the debt also falls well within the period of limitation.

In continuum, the Hon’ble Supreme Court in various landmark judgements have reiterated that, the adjudicating authority has merely to see the records or other evidence produced and satisfy itself that a default has occurred. Also, the default arising in the present Application is much prior to the advent of the Covid-19 pandemic and hence the Corporate Debtor also cannot seek shelter under Section 10A of IBC, 2016. Thus, the Adjudicating authority in this present case is of the considered view that the ‘preponderance of probabilities’ clearly proves “the existence of a debt and default” which is sufficient to trigger the CIRP against the Corporate Debtor herein Viz., LSML Private Limited. Under the said circumstances, this Tribunal is left with no other option than to proceed with the present case and initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor.

Thus, taking into consideration the facts and circumstances of the case as well as the position of Law, we are of the view that the Petition, as filed by the Operational Creditor, is required to be admitted under Section 9(5) of the IBC, 2016. Since the Operational Creditor has not named the Insolvency Resolution Professional, this Tribunal based on the latest list furnished by Insolvency and Bankruptcy Board of India applicable for the period between June 2022 – December 2022 appoints N.Venkatesh, with Reg No: IBBI/IPA-001/IP-P-02315/2021-2022/13572 (email id: venkatesh@vsandassociates.in) as the “Interim Resolution Professional” subject to the condition that no disciplinary proceedings are pending against such an Interim Resolution Professional named and disclosures as required under IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 are made within a period of one week from the date of this order. The IRP appointed shall take in this regard such other and further steps as are required under the Statute, more specifically in terms of Section 15,17,18 of the Code and file his report within 20 days before this Bench. The powers of the Board of Directors of the Corporate Debtor shall stand superseded as a consequence of the initiation of the CIRP in relation to the Corporate Debtor in terms of the provisions of IBC, 2016.

As a consequence of the Application being admitted in terms of Section 9 (5) of the Code, the moratorium as envisaged under the provisions of Section 14(1) and as extracted hereunder shall follow in relation to the Corporate Debtor:

However, during the pendency of the moratorium period in terms of Section 14(2) (2A) and 14(3) as extracted hereunder:

The duration of the period of moratorium shall be as provided in Section 14(4) of the Code and for ready reference reproduced as follows:

The Operational Creditor is directed to pay a sum of Rs.2,00,000/-(Rupees Two lakhs only) to the Interim Resolution Professional upon the Interim Resolution Professional filing the necessary declaration form as required under the provisions of the Code to meet out the expenses to perform the functions assigned to her in accordance to Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Based on the above terms, the Application stands admitted in terms of Section 9(5) of IBC, 2016 and the moratorium shall come in to effect as of this date. A copy of the Order shall be communicated to the Operational Creditor as well as to the Corporate Debtor above named by the Registry. In addition, a copy of the Order shall also be forwarded to IBBI for its records. Further, the Interim Resolution Professional above named who is figuring in the list of Resolution Professionals forwarded by IBBI be also furnished with copy of this Order forthwith by the Registry, who will also communicate the initiation of the CIRP in relation to the Corporate Debtor to the Registrar of Companies concerned.

The IRP is directed to file the 1st Progress Report before this Tribunal on or before the 45th day of initiation of CIRP by this Adjudicating Authority.