Steel Associates vs Richfield Engineering India Private Limited

This petition is a transfer petition originally filed before the Honble High Court of Gujarat (Company Petition 287 of 2014) seeking winding up of the Respondent company for nonpayment of invoices due and payable within 45-60 days of invoice which remained unpaid, under the relevant provisions under Section 433 and 434 read with Section 439 of Companies Act, 1956. There are 5 invoices raised by the petitioner amounting to Rs.30,24,418/- for the period between January 2014 to March 2014 as mentioned in application. A separate debit note for interest due was raised for an amount of Rs.3,43,772/- thereby an amount of Rs. 33,68,190/- is stated to be due and payable. It is also submitted that the applicant had raised various demands including letters dated 5/8/2014 and 9/9/2014 but Respondent had neither paid nor raised any objections. Demand Notice under the statutory provisions under section 433 & 434 of Companies Act, 1956 was served on 18th October, 2014. The applicant has thereby proved his application to have been filed within the period of limitation in the appeal filed before the Hon'ble High Court, which after various orders/appeals and the matter being still not settled, with relevant provisions now under the IBC 2016 (Respondent being a Company incorporated under Companies Act) stands transferred before this bench. All the relevant Invoices and Debit notes are enclosed.

It is stated in the orders of the Hon'ble High Court dated 8th January, 2018 that "the court therefore finds that as regards Invoice No.69, it would be appropriate to observe that if the company wants to deposit the amount towards outstanding amount claimed by the petitioner, it may presently exclude above referred amount of Rs. 6, 78, 447/- and deposit rest of the outstanding amount before 30/01/2018. The respondent has disputed only one invoice No.69 of which has not been agreed out of the total invoices amounting to Rs 33,68,190 lakhs was due (Rs.30,24,418 plus interest of Rs.3,43,772) which were raised between January 2014 and March 2014 and payable. The respondent is observed to have not paid outstanding dues and preferred various appeals even before the Hon'ble Supreme Court, wherein Respondent did not get any relief in the matter.

Irrespective of dispute if any the amount due and payable breach of any terms and conditions of purchase order is not established as only one of the invoices has not been paid. The applicant has enclosed the purchase order REIPL:306:2013-14 Dated 30th December, 2013. The Applicant has found from the invoices that various requirements including the tax, delivery vehicle No., test reports have been specified and delivery was to be made in terms of purchase order within 60 days from date of delivery/order. The Purchase of the goods comprising of steel from the applicant who is stated to be a whole sale supplier was compiled to the site ordered of the respondent.

It becomes apparent that the respondent had not disputed at any time and there were communications between them, however in the reply dated 26th November, 2014 the respondent has disputed stating that while using the material in their contract with their client Indian Oil Corporation, the same was rejected first rejected on 10th January 2014. Even if there was any dispute raised in the contract executed between the respondent and his supplier on 10th January 2014, all the invoices enclosed in this application as not paid are subsequent to include the first invoice dated 10th January, 2014 which was supplied at the Respondent's address with due payment 60 days from the date of delivery. If there was a dispute, the same should have been raised within the 60 days as per contract and any rejection of material supplied by the respondent to its client namely IOC or any other party does not have any bearing on this underlying due as nothing is specified either in invoice (if the applicant had delivered to the respondent's client) or in the purchase order. Neither the respondent raised any dispute before any court of law if the matter was under dispute before the issuance of demand notice, and all defence as reply to the demand notice issued need not be taken as cognizance in the matter which involves a separate contract for purchase of goods at the respondents factory and any dispute with its clients is a different matter not built in to the contract. The applicant being a sole proprietor is thereby denied of the payment on certain frivolous contention which has not been allowed by the Civil Courts on appeal including the Hon'ble High Court of Gujarat and Hon'ble Supreme Court.

The petition filed is under the relevant provisions under Companies Act 1956. As per the fifth proviso to sec 434(1) (c) inserted on August 17, 2018 has permitted a transfer of winding up proceedings to the NCLT "pending immediately before any court immediately before the IBC (Amendment) Ordinance 2018". This application thus enables the applicant to transfer such proceedings to NCLT and treat the same as an application for initiation of corporate insolvency process under the IBC. As per Hon'ble Supreme Court order the applicant was a party to the winding up proceedings and the intention of the transfer of the proceedings is to ensure that there are no parallel proceedings against the Respondent.

Having admitted the application, the provisions of Moratorium as prescribed under Section 14 of the Code shall be operative henceforth with effect from the date of order shall be applicable by prohibiting institution of any suit before a Court of Law, transferring/encumbering any of the assets of the Debtor etc. However, the supply of essential goods or services to the “Corporate Debtor” shall not be terminated during Moratorium period. It shall be effective till completion of the Insolvency Resolution Process or until the approval of the Resolution Plan prescribed under section 31 of the Code.

That as prescribed under Section 13 of the Code on declaration of Moratorium the public announcement of the invitation of Corporate Insolvency Resolution Process shall be carried out by the IRP immediately as specified.

That the Interim Resolution Professional shall perform the duties as assigned under Section 18 of the Code and inform the progress of the Resolution Plan and the compliance of the directions of this order within 30 days to this bench.

We hereby appoint Mr. Rajendra Jain having Registration No. IBBI/IPA-002/IP-N00732 /2018-19/12353, e-mail id -iprajendragjain@gmail.com to act as an IRP under section 13(1) (c) of the Code. He shall conduct the Corporate Insolvency Resolution Process as per the provisions of Insolvency and Bankruptcy Code, 2016 r.w. Regulation made thereunder.

The IRP shall perform all his functions as contemplated, inter-alia, by sections 17, 18, 20 & 21 of the Code. It is further made clear that all personnel connected with Corporate Debtor, its Promoter or any other person associated with management of the Corporate Debtor are under legal obligation under Section 19 of the Code to extend every assistance and co-operation to the Interim Resolution Professional. Where any personnel of the Corporate Debtor, its Promoter or any other person, is required to assist or co- operate with IRP, do not assist or Co-operate, the IRP is at liberty to make appropriate application to this Adjudicating Authority with a prayer for passing an appropriate order.

The IRP is expected to take full charge of the CD's assets, and documents without any delay whatsoever. He is also free to take police assistance in this regard, and this Court hereby directs the Police Authorities to render all assistance as may be required by the IRP in this regard.

The IRP or the RP, as the case may be shall submit to this Adjudicating Authority periodical report with regard to the progress of the CIRP in respect of the Corporate Debtor.

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 Adjudicating Authority approves the Resolution Plan under sub-section (1) of the Section 31 or passes an order for liquidation of Respondent/Corporate Debtor Company under Section 33 of the IBC, 2016, as the case may be.

The IRP shall be under a duty to protect and preserve the value of the property of the 'Corporate Debtor Company' and manage the operations of the Corporate Debtor Company as a going concern as a part of the obligation imposed by Section 20 of the Insolvency & Bankruptcy Code, 2016.

The Operational Creditor is directed to pay an advance of Rs.1,00,000/- (Rupees One Lakh Only) to the IRP within two weeks from the date of receipt of this order for the purpose of smooth conduct of the Corporate Insolvency Resolution Process (CIRP) and IRP to file proof of receipt of such amount to this Adjudicating Authority along with First Progress Report within 30 days.

The Registry is directed to communicate a copy of this order to the Operational Creditor, the Corporate Debtor and to the Interim Resolution Professional and the concerned Registrar of Companies, after completion of necessary formalities, within seven working days and upload the same on the website immediately after pronouncement of the order.

The petition is admitted. The commencement of the Corporate Insolvency Resolution Process if pronounced and effective from the date of this order.

A certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities.