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Judgment
PER: BENCH
This Petition is filed under Section 9 of Insolvency and Bankruptcy Code (hereinafter to be referred as “Code”), read with Rule 6 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking admission of the petition, initiation of Corporate Insolvency Resolution Process (CIRP), granting moratorium and appointment of Interim Resolution Professional as prescribed under the Code and Rules thereon, contending that the Respondent defaulted in the payment of alleged debt of Rs. 6,80,16,090.83/- (six crores eighty lakhs sixteen thousands ninety rupees and eighty three paisa only).
The averments in brief of the Application and Written Submission are that;
The Petitioner formally known as Green Ark Enersol Pvt.Ltd, herein after referred to as “Operational Creditor”, is a Private Limited company which has its registered office at Hyderabad, is in business supplying of high performance GSM/GPRS,GPS,RF, Wi-Fi, Bluetooth, IoT and customised products.
(ii). The Respondent, herein after referred to as “Corporate Debtor”, is a Private Limited Company incorporated under the Companies Act, 1956.
(iii). The Corporate Debtor had approached the Operational Creditor for supply of AMR based modems along with antenna and Communication cables and raised two purchase orders with Operational Creditor.
(iv). The Operational creditor supplied 16130 AMR modules along with antenna and communication cables for which the Operational Creditor had raised invoices on the name of the Corporate Debtor. Further submitted that the Corporate Debtor failed to clear the dues as per the purchase order dated 03.11.2015.
(v). The Corporate debtor has acknowledged the supply of 16130 AMR modems and out of these, 5000 modems have been installed and are integrated with the servers and being used to acquire data from the meter and push to head end system seamlessly in TANGEDCO vide letter dated:10.04.2017.
(vi). The Corporate Debtor gave a No Objection Certificate date 08.12.2018 to raise invoices for supply of 16130 AMR modems and I&C of around 3000 modems as per contract directly with the TANGEDCO, where the same invoices were rejected by the TANGEDCO on the ground that TANGEDCO didn’t give any purchase order to Operational Creditor.
(vii). Subsequently, the Operational Creditor sent a demand notice dated 30.11.2020 to Corporate debtor as per provisions of the code for which neither reply nor payment received from the Corporate Debtor. Hence, prayed this tribunal to admit this application.
Reply filed by Corporate Debtor states:
(a). That the Corporate Debtor never entered into any kind of agreement with the Operational Creditor and more particularly the one stated in the instant petition.
(b). That the Operational Creditor has no Locus to file the present petition. Although the operational Creditor states that it was formerly known as Green Ark Enersol Pvt.Ltd ( Green Ark.) but the operational Creditor didn’t substantiated the same with any documentary evidence.
(c). That for arguments sake if the Operational Creditor is considered as the legal entity as Green Ark, the Corporate Debtor is still not liable to pay any amount and more particularly under the purchase orders being relied upon by the Operational Creditor.
(d). That the Corporate Debtor placed purchased with Green Ark for the supply and installation of 20000 AMR based modems, Antenna with cable & communication, Installation & commissioning of modems, Integration of Modems with MDAS software and Facility Management Service (FMS) for a period of 63 Months from the date of go-live for the R-APDRP project for TANGEDCO(Tamil Nadu Generation and Distribution Company).
That the Green Ark had supplied only 16140 modems against the ordered number of 20000.Out of supplied 16140 modems, Green Ark had completed the installation of only 2945 modems. Further submitted that due to delay in installation of modems, the TANGEDCO(the principal contractor) had stopped the payment to Corporate Debtor.
That despite being the shortfall in the supply of modems, The Corporate Debtor still paid the 40 % of the cost i.e Rs. 2,50,52,800/-out of Rs.6,26,32,001/- and another Rs 22,85,641/- on installation of only 2945 modems. Further submitted that the clause 16 of the purchase states that all supplies shall be made within 60 days which was not complied by the Green Ark.
That the Green Ark has defaulted on its obligation under the purchase order and therefore not entitled to any payments. The corporate debtor and Green Ark had come to mutual understanding that the remaining payment shall be done by TANGEDCO on completion of the remaining work by the Green Ark.
Further submitted that there is no admitted liability and serious disputes exist between Corporate Debtor and Greek Ark with regard to the quality of work done under the purchase order. Hence, prayed this tribunal to dismiss the present application.
In the light of the contest as mentioned above, the following points framed for consideration by this Adjudicating Authority:
Whether the documentary evidence furnished with application shows that the aforesaid debt is due and payable and has not yet been paid?
Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of demand notice of the unpaid operational debt in relation to such dispute?
We have heard the Ld. Counsel Shir Pranay Sohini for the Operational Creditor and Ld. Senior Counsel Shri Dammalapati Srinivas and Ld. Counsel Shri Vimal Vasireddy, for the Corporate Debtor, perused the documents on record and case laws.
At the very outset, we may state herein that in order to arrive at a just and proper finding on the points involved in the subject lis, we feel it apt to rely on the following illuminating rulings of Hon’ble Supreme Court of India, on the legal aspects of sections 7 and 9 of I&B Code 2016;
(i). M/s Innoventive Industries Vs. ICICI Bank & another in Civil Appeal Nos.8337-8338 of 2017.
(ii). Decision in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited rendered by the Hon’ble Supreme Court in Civil Appeal No. 9405 OF 2017 dated 21.09.2017.
In re, M/s Innoventive Industries, supra, Hon’ble Supreme Court of India, held that;
“The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under 71 Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing – i.e., before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code.”
“On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is “due” i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.”
(2). In re, Mobilox Innovations Private Limited (supra), Hon’ble Supreme Court of India, has held that;
“It is, thus, clear that so far as an operational creditor is concerned, a demand notice of an unpaid operational debt or copy of an invoice demanding payment of the amount involved must be delivered in the prescribed form. The corporate debtor is then given a period of 10 days from the receipt of the demand notice or copy of the invoice to bring to the notice of the operational creditor the existence of a dispute, if any. We 72 have also seen the notes on clauses annexed to the Insolvency and Bankruptcy Bill of 2015, in which “the existence of a dispute” alone is mentioned. Even otherwise, the word “and” occurring in Section 8(2)(a) must be read as “or” keeping in mind the legislative intent and the fact that an anomalous situation would arise if it is not read as “or”. If read as “and”, disputes would only stave off the bankruptcy process if they are already pending in a suit or arbitration proceedings and not otherwise.”
“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 or 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”
(3). In in the same ruling, it has been also that,
“Therefore, the adjudicating authority, when examining an application under Section 9 of the Act will have to determine: (i) Whether there is an “operational debt” as defined exceeding Rs.1 lakh? (See Section 4 of the Act) (ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and (iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute?”
“If any one of the aforesaid conditions is lacking, the application would have to be rejected.” (Emphasis is ours).
Thus the sine qua non for triggering the CIRP against the corporate debtor by the operational creditor is existence of debt and default .In so far as the case on hand is concerned there is no dispute raised with regard to the existence of debt between the operational creditor and corporate debtor and in fact the corporate debtor had even made part payments towards amount claimed under the invoices.
The record reveals that despite of receiving the demand notice corporate debtor has not chosen to send any reply that apart no record has been filed by the corporate debtor showing that it has raised the dispute as regards to the quality of services rendered by the operational creditor before receipt of demand notice.
Therefore, it is evident from our discussion above that documentary evidence placed clearly shows that the debt is due and payable by the Corporate Debtor. However, the same has not been paid. We therefore allow the petition and hereby ordering the petition to initiate CIRP.
The Operational Creditor has filed memo and requested this Adjudicating Authority to appoint one for the Insolvency Resolution Professionals as IRP. The IBBI has recommended a panel of Insolvency Professionals for appointment as Insolvency Resolution Professional for the period from July 1st 2022 to December 31st 2022 in compliance with Section 16(3)(a) of the Code in order to avoid delay. Accordingly, this Tribunal appoints Mr. Kotoju Vasudeva Rao, having Registration No. IBBI/IPA-002/IP-N00889/2019-2020/12924, email: vasurkotoju[at]gmail[dot]com, as IRP. As per the IBBI website, his AFA is valid upto 20-Mar-23. The aforesaid IRP has no disciplinary proceedings pending against him. He shall file his written communication and all relevant papers immediately before the Registrar of this Adjudicating Authority but not later than three days.
Hence, in view of the reasons stated as above, the Adjudicating Authority is inclined to admit the petition. Accordingly, this Company Petition under Section 9 of IBC, 2016, is hereby admitted declaring moratorium for the purposes referred to in Section 14 of the Code, with following directions:
The Bench hereby 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 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); the recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor;
Notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concessions, clearances or a similar grant or right during the moratorium period.
That the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period.
That the provisions of sub-section (1) of Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
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 or passes an order for liquidation of Corporate Debtor under Section 33, whichever is earlier.
That the public announcement of the initiation of Corporate Insolvency Resolution Process shall be made immediately as prescribed under section 13 of Insolvency and Bankruptcy Code, 2016.
The petitioner is directed to deposit a sum of Rs.1,00,000/- with the interim resolution professional to meet out the initial CIRP expenses to perform the functions assigned to him in accordance with Regulation 6 of IBBI regulation, 2016. The initial expenditure incurred by IRP shall, however, be subject to the approval by the COC, in its first meeting.
Registry is directed to send a copy of this order to the Operational Creditor and IRP appointed in this case.
Accordingly petition is admitted.
The Operational Creditor is directed to communicate this order to the IRP appointed in this case.
The Registry of this Tribunal is directed to send a copy of this order to the Registrar of Companies, Hyderabad for marking appropriate remarks against the Corporate Debtor on website of Ministry of Corporate Affairs as being under CIRP.
The Registry is directed to furnish free copy to the parties as per Rule 50 of the NCLT Rules, 2016.