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Judgment
Per V.P. Singh, Member (Judicial)
ORDER
It is a Company Petition filed under section 9 of Insolvency & Bankruptcy Code, 2016 (I&B Code) by Shine & Shine Enterprises, the Petitioner/Operational Creditor against the Canaan Engineering Private Limited, the Respondent/Corporate Debtor for initiation of Corporate Insolvency Resolution Process (CIRP) on the ground that the Corporate Debtor has defaulted in payment of Rs.25,54,786.91 against various invoices for supply of goods related to the welding fabrication of industrial consumables.
The Principal amount in default as per the Form-5 is Rs.15,53,849/- and interest of Rs.10,00,937.91, the total amount of claim is Rs.25,54,786.91/- and the last payment made by the Corporate Debtor in the present case as per the petitioner is on 14.10.2016.
The Operational Creditor has sent the Demand Notice dated 12.01.2018 under section 8 of I&B Code demanding the total amount of debt of Rs. 25,54,786.91.
The Operational Creditor has stated that the invoices and challans are accepted by the Corporate Debtor, and this proves that the amount claimed by the operational creditor is duly accepted by the Corporate Debtor. Further, the Operational Creditor has stated that the Corporate Debtor sent its ledger copy by an email dated 07.04.2015 to the Operational Creditor, which proves that the Corporate Debtor acknowledged the outstanding debt.
The Operational Creditor submitted that the letter dated 05.11.2015 shows that the Corporate Debtor was aware of its liability to pay the Operational Creditor and Corporate Debtor admitted the outstanding unpaid debt of Rs. 18,51,451/-. The letter further mentioned the payment of the debt by way of instalments as per below-mentioned schedule:
First Instalment: Rs.4,00,000/- (before 31.12.2015)
January 2016 to April 2016: Rs.1,00,000/- (Rupees One Lakh) every month
May 2016 to November 2016: Rs.1,50,000/- (Rupees One Lakh Fifty Thousand)
The Corporate debtor had assured that it shall try and clear lumpsum payments before the above-committed dates but could only pay Rs.3,00,000/- till 14.10.2016.
The operational creditor stated that it has field insolvency petition against the corporate debtor for the same cause of action on 01.07.2017, however the same was withdrawn due to some technical lapses on 06.09.2017, by the Operational Creditor with the liberty to file fresh insolvency petition and the current petition was filed on 27.03.2018.
The Operational Creditor submitted that there is no notice of the existence of a dispute received by the Operational Creditor from the Corporate Debtor and Corporate Debtor failed to make the payment to the Operational Creditor even after the receipt of the demand notice dated 12.01.2018.
The Corporate Debtor in its Affidavit in Reply dated 06.11.2018 has submitted that the present petition is liable to be dismissed as there is an existing dispute between the parties and by the action of purchase manager along with his wife, the petitioner hereinabove, has caused loss to the company and its business. The applicant has with an ulterior motive, to extract further amount, has now filed the present petition. The Corporate Debtor further states that they have already served a legal notice upon the proprietor of the Operational Creditor and the purchase manager Mr Shibu Nadar on 18.09.2017.
The Corporate Debtor in its Legal Notice dated 18.09.2017 has submitted that, the Purchase Manger along with the Petitioner with an ulterior motive, in order to defraud the Company established a proprietary concern to obtain orders and supply the materials to the Corporate Debtor, only to sell at much higher prices, as compared to the prevalent market price of the materials, at relevant point of time, of the other vendors.
The Operational Creditor in its written submission has annexed the reply (dated 21.11.2017) to the legal Notice (dated 18.09.2017) wherein it has stated that Mrs Navneeta Shibu Nadar is nowhere concerned with internal Disputes between Mr Shibu Nadar and Corporate Debtor Company. The Operational Creditor in its written submission further submits that the Corporate Debtor had never raised any dispute concerning the supply of goods and services till filing of the Petition under I&B Code. Even in the reply, the Corporate Debtor failed to prove any dispute and have allegedly tried to create dispute without any basis.
Since the Corporate Debtor failed to make a payment, the Operational Creditor has filed this Petition before this Tribunal.
Heard the parties and perused the material available on record.
The M/S Shine &Shine Enterprises is sole proprietorship concern, and Petition is filed by Mr Shivshankar Baburam Jaiswal, as Appointed Attorney for this purpose of M/S Shine & shine Enterprises, duly authorised by Power of Attorney dated 23.06.2017.
As per section 9(3)(b) of the I&B Code, the Operational Creditor stated that there is no notice given by the Corporate Debtor relating to a dispute of the unpaid Operational Debt. Further, Operational Creditor states that there is no dispute in existence about the unpaid operational debt.
In compliance of Sec 9(3)(c) of the Insolvency and Bankruptcy Code,2016, the Operational Creditor has submitted the letter dated 08.03.2018 by the IDBI Bank to confirm that as per the records available with the bank no amount is deposited into cash credit account and current account between 15.10.2016 to 27.02.2018 by Canaan Engineering Pvt. Ltd. through any method including cheque, demand draft or RTGS.
It is observed that the Operational Creditor has supplied goods related to the welding fabrication of industrial consumables to the Corporate Debtor and raised various invoices in the year 2014 amounting to Rs.15,53,849/-. The last payment made by the Corporate Debtor in the present case as per the Petitioner is on 14.10.2016. Further, it is clear from the letter dated 05.11.2015 that the Corporate Debtor was aware of its liability to pay the Operational Creditor and that the corporate Debtor admitted the outstanding unpaid debt of Rs. 18,51,451/-. The letter further also mentions a schedule of payment in instalments. This letter would be a sufficient acknowledgement of the debt by the Corporate Debtor and further clears that the Petition is filled within the limitation period.
The Operational Creditor sent demand notice dated 12.01.2018 to the Corporate Debtor. The said notice was delivered on 13.01.2018 to the Corporate Debtor, and Corporate Debtor did not raise any dispute.
The Operational Creditor further in his written submission submits that, the withdrawal of earlier petition on 06.09.2017 was with the liberty to file fresh proceeding and the Corporate Debtor knew it very well that Operational Creditor will file fresh proceeding against them and just to take the defence, Corporate Debtor tried to create dispute which is nothing but an afterthought on the part of Corporate Debtor for the sake of creating dispute.
The Hon’ble Supreme Court in the matter of Mobilox Innovations Private Limited vs Kirusa Software Private Limited (CIVIL APPEAL NO. 9405 OF 2017) has, inter alias Para 24 of the said judgment, held that:
“24.The scheme Under Sections 8 and 9 of the Code, appears to be that an operational creditor, as defined, may, on the occurrence of a default (i.e., on non payment of a debt, any part whereof has become due and payable and has not been repaid), deliver a demand notice of such unpaid operational debt or deliver the copy of an invoice demanding payment of such amount to the corporate debtor in the form set out in Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Form 3 or 4, as the case may be (Section 8(1)). Within a period of 10 days of the receipt of such demand notice or copy of invoice, the corporate debtor must bring to the notice of the operational creditor the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute (Section8(2)(a)) National Company Law Tribunal existence of the dispute and/or the suit or arbitration proceeding must be “pre-existing,” i.e. it must exist before the receipt of the Demand Notice.”
There is no pre-existing dispute raised regarding the unpaid operational debt in the present case. Further in Para 40 of the said judgment, it is held that:
Para 40:
“ It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the "existence" of a dispute the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application.”
The Corporate Debtor had sent a Legal Notice to Operational Creditor on 18.09.2017and tried to attempt to prove the collusion between its ex-employee and Operational Creditor. However, this Legal notice by the Corporate Debtor is sent after the first petition was withdrawn on 06.09.2017 under section 9 before this Tribunal.
The Corporate Debtor has not raised any dispute regarding the supply of goods neither has it stated that the debt had been repaid. The only contention of the Corporate Debtor is that the Operational Creditor is a related party of an ex-employee of the Corporate Debtor and that this fact was not disclosed to the management of the Corporate Debtor and the Operational Creditor has taken advantage by charging higher prices of the goods than the market value. It is pertinent to note that Mr. Shibu Nadar left the employment of the Corporate Debtor in November 2014. Since then, the Corporate Debtor has not raised any dispute until the first petition is filed under section 9 of I&B Code and withdrawn in the year 2017. This contention of the Corporate Debtor is a mere argument without any supporting evidence and cannot be taken as a pre-existing dispute for rejection of section 9 Petition.
The Corporate Debtor has explicitly stated in its letter dated 05.11.2015 that it shall try to make the lumpsum payments before the committed dates however failed to do so and defaulted in making payment of an outstanding debt. Thus, the existence of debt and default is established.
The Operational Creditor has not proposed the name of an Interim Resolution Professional. This bench, therefore, appoints Mr Anish Gupta, Registration No. IBBI/IAP-002/IP-N00285/2017-18/10843 as Interim Resolution Professional with his consent in Form 2 declaring that no disciplinary proceedings are pending against him.
The application made by the Operational Creditor is complete in all respects as required by law, and it clearly shows that the operational debt is due and has not been paid. Thus it is clear that petition filed U/S 9 of the Code deserves to be admitted.
Order
The petition filed by M/s Shine & Shine Enterprises, the Petitioner/Operational Creditor against the Cannan Engineering Private Limited, the Respondent/Corporate Debtor, U/S 9 of the I&B Code 2016 is at the moment admitted. We further declare moratorium under section 14 of the I&B Code with consequential directions, as mentioned below:
I. That this Bench at this moment prohibits:
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 Securitization 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. It is further made clear that:
a. 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.
b. That the provisions of sub-section (1) of Section 14 of IBC shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
c. That the order of moratorium shall have effect from the date of this order till the completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of section 31 of IBC or passes an order for liquidation of corporate debtor under section 33 of IBC, as the case may be.
d. That the public announcement of the corporate insolvency resolution process shall be made immediately as specified under section 13 of IBC.
e. That this Bench at this moment appoints Mr Anish Gupta, Registration No. IBBI/IAP-002/IP-N00285/2017-18/10843, as Interim Resolution Professional to carry out the functions as mentioned under IBC. The fee to be paid to Interim Resolution Professional/ Resolution Professional should be strictly by the Regulations of the IBBI, circulars, directives issued in this regard.
The Registry is at this moment directed to immediately communicate this order to the Operational Creditor, the Corporate Debtor and the Interim Resolution Professional by speed post/ email/ WhatsApp.Compliance report of the order by Designated registrar is to be submitted today.