At the National Company Law Tribunal (NCLT) in Kolkata, a petition was filed by an Operational Creditor, requesting the initiation of the insolvency process against a Corporate Debtor due to payment default. A division bench, consisting of Ms. Bidisha Banerjee and Mr. Balraj Joshi (Technical Member), accepted the Operational Creditor’s application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). This led to the establishment of a moratorium under Section 14 of the IBC and the appointment of an Insolvency Resolution Professional (IRP) as well.

Case Overview

In this case, the Director of Aldous Commodities Private Limited, acting as the Operational Creditor, has filed a petition under Section 9 of the IBC and Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The objective of the petition is to initiate the Corporate Insolvency Resolution Process (CIRP) against Aanchal Ispat Limited, the Corporate Debtor.

The total debt claimed by the Operational Creditor amounts to Rs. 2,56,04,955, which includes a principal sum of Rs. 1,82,39,863 and accrued interest of Rs. 73,65,132, calculated at a rate of 18% per annum until December 5, 2020. It’s worth noting that the Section 9 petition does not specify a particular date of default.

Operational Creditor’s Contentions

The Operational Creditor argued that they had issued invoices totaling Rs. 7,43,94,643, which the Corporate Debtor had received without any disputes. Initially, the Corporate Debtor made partial payments for these invoices, which included the issuance of post-dated cheques. However, one of these cheques bounced due to insufficient funds.

Upon being informed of this issue by the Operational Creditor, the Corporate Debtor acknowledged the error and assured that they would rectify it. They continued to make partial on-account payments, gradually reducing the outstanding amount to Rs. 2,22,39,863. Additionally, the Corporate Debtor indicated that a payment of Rs. 1.40 crores on their behalf would be made by their sister concern.

The Corporate Debtor even sent an email confirming the payment of Rs. 1.40 crores from their sister concern. However, the Operational Creditor received only Rs. 10,00,000 as a part payment. In total, the Operational Creditor received Rs. 5,61,54,780 in partial payments but still had an outstanding amount of Rs. 1,92,39,863.

Corporate Debtor’s Contentions

The Corporate Debtor contended that the application is not maintainable because of an existing dispute between the parties, and therefore, it should be dismissed under Section 8(2)(a) in conjunction with Sections 5(6) and 9(5)(ii)(d) of the IBC.

Furthermore, the Corporate Debtor argued that the Operational Creditor deliberately concealed crucial facts. They also asserted that the application is subject to the restrictions of Section 10-A of the IBC, as the default date falls within the suspension period outlined in Section 10A. The Corporate Debtor disputed the revised default date presented by the Operational Creditor. Additionally, they pointed out that the Operational Creditor had issued communications acknowledging a pre-existing dispute, which, in their view, should result in the dismissal of the Section 9 application.

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NCLT’S Analysis

The NCLT’s analysis revealed the existence of a genuine debt owed by the Corporate Debtor to the Operational Creditor, establishing an operational debt. The issuance of cheques in an equivalent amount by the Corporate Debtor, followed by their subsequent bouncing, constituted a clear default on the part of the Corporate Debtor. Consequently, the NCLT accepted the Operational Creditor’s application, concluding that the bouncing of post-dated cheques indicated the Corporate Debtor’s liability.

The NCLT dismissed the Corporate Debtor’s contentions regarding a pre-existing dispute and the applicability of Section 10-A of the IBC, citing a change in the Corporate Debtor’s stance over time as revealed in the evidence. The NCLT found that the Corporate Debtor had failed to substantiate the existence of a pre-existing dispute sufficient to justify the rejection of the application.

Furthermore, the NCLT noted that the Operational Creditor had attempted to mislead by withholding pertinent documents, which further supported the decision to admit the application.

In line with standard insolvency procedures, the NCLT appointed an Interim Resolution Professional (IRP) and imposed a moratorium.

NCLT’s Decision

The NCLT granted approval for the Operational Creditor’s insolvency application against the Corporate Debtor due to the evident payment default. Consequently, the case will move forward with the appointment of an Insolvency Resolution Professional (IRP) and the commencement of the Corporate Insolvency Resolution Process (CIRP).

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