Narindra & Narindra Steel Corporation's application under Section 9 of the Insolvency and Bankruptcy Code accepted; Moratorium declared.
In a significant ruling, the National Company Law Tribunal (NCLT) in New Delhi has admitted an application filed by Narindra & Narindra Steel Corporation, paving the way for the initiation of the Corporate Insolvency Resolution Process (CIRP) against Swadesh Green Infra Limited. The judgment, delivered by Mr. Bachu Venkat Balaram Das, Member (Judicial), and Mr. Ravindra Chaturvedi, Member (Technical), marks a crucial development in the dispute between the two parties.
The case stems from a claim filed by Narindra & Narindra Steel Corporation, an operational creditor, asserting default by Swadesh Green Infra Limited in supplying goods despite receiving advance payment. The NCLT examined the claim under Section 9 of the Insolvency and Bankruptcy Code, 2016, which allows operational creditors to initiate insolvency proceedings in case of unpaid dues.
The tribunal's decision hinged on several key factors, including the nature of the debt, the existence of default, and allegations of pre-existing disputes. The applicant, Narindra & Narindra Steel Corporation, argued that Swadesh Green Infra Limited failed to supply goods worth approximately Rs. 1.03 crore, despite receiving advance payment. The operational creditor also pointed to a dishonoured cheque issued by Swadesh Green Infra Limited as evidence of acknowledgment of the debt.
Swadesh Green Infra Limited contested the claims, arguing that the amount did not constitute operational debt under the Code and claimed pre-existing disputes between the parties. However, the NCLT found the arguments unconvincing, noting the absence of substantial evidence supporting the alleged disputes and discrepancies in accounting entries provided by the corporate debtor.
The tribunal concluded that the claim constituted operational debt, given its direct link to a commercial transaction for the supply of goods. It also found that the statutory threshold for default under Section 4 of the Code had been satisfied. The tribunal rejected the corporate debtor's defence of a pre-existing dispute, citing lack of contemporaneous evidence, and determined that the dishonoured cheque further substantiated the operational creditor's claim.
Following the admission of the application, the NCLT declared a moratorium under Section 14 of the Code, imposing restrictions on suits, property transactions, and enforcement actions against Swadesh Green Infra Limited. Mr. Niraj Kumar has been appointed as the Interim Resolution Professional (IRP) to oversee the insolvency proceedings.
This ruling underscores the tribunal's adherence to the principles established in the landmark Mobilox judgment, which emphasized the need for genuine disputes to be supported by substantial evidence. The decision serves as a reminder of the importance of maintaining transparent and accurate records in commercial transactions.
The tribunal's order mandates Swadesh Green Infra Limited to cooperate with the IRP and provide necessary documentation and information. The IRP is tasked with managing the corporate debtor's assets and ensuring compliance with the insolvency process.
The NCLT's decision is expected to have significant implications for Swadesh Green Infra Limited's operations and may impact its standing in the iron and steel trading sector. The initiation of CIRP provides a structured mechanism for resolving financial distress, potentially leading to reorganization or liquidation based on the outcome of the process.
Bottom line:-
Insolvency and Bankruptcy Code - Application under Section 9 by an operational creditor - Claim based on advance payment linked to a commercial transaction for the supply of goods - Claim qualifies as "operational debt" under the Code.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 9, 5(20), 5(21), 4, 14, and Negotiable Instruments Act, 1881 Section 138
