NCLAT upholds CIRP Proceedings initiated u/s 9 of IBC against Corporate Debtor for outstanding dues to Operational Creditor [Read Order]

The Delhi bench of the National Company Law Appellate Tribunal ( NCLAT ) upheld the Corporate Insolvency Resolution Professional ( CIRP )  proceedings initiated under Section 9 of the Indian Bankruptcy Code ,2016 against the corporate debtor for outstanding dues to the operational creditor.

The present appeal filed by Mr. Mukund Rajhans, Suspended Director Topaki Media Private Limited (“TMPL”) under Section 61 of the Insolvency and Bankruptcy Code, 2016 against the Order dated 10.08.2023 passed by the National Company Law Tribunal, Mumbai Bench whereby the Adjudicating Authority has admitted the Application under Section 9 of the Code and CIRP proceeding have been initiated against the Appellant.

Vipul Wadhwa, Senior Counsel appearing for the Appellant argued that TMPL did not owe any operational debt to the Respondent because it was merely acting as an agent of Videocon Industries Limited while dealing with the Respondent. Therefore, in terms of Section 230 of Indian Contract Act, 1872 , TMPL could not have been made liable to repay the dues owed by VIL.

Further argued that the Respondent did not serve / failed to prove the service of the demand notice issued under Section 8 of the Insolvency & Bankruptcy Code, 2016. Although the TMPL did not owe any operational debt to the Respondent in terms of Section 5(21) of the IBC because the beneficiary of the Respondent’s advertising services was VIL and not TMPL.

Anand Shankar Jha, Counsel appearing for the respondent argued that  the impugned order dated 10.08.2023 is decided on merits and is well-reasoned. There is no error either on a factual or legal basis. There is a clear existence of debt and default and the impugned order satisfies all the elements under Section 9 of the Code as well as the judgment of the Apex Court in the matter of Innoventive Industries Limited Vs. ICICI Bank.

It was observed by the tribunal that “the Applicant has never brought out any dispute with respect to the unpaid invoices neither in its reply to the demand notice (Reply to the demand notice was not issued at all) nor during the CIRP proceedings also. On the basis of the record, it is evident that the Applicant has clearly admitted the existence of the debt.”

After analyzing the submission of both parties the bench comprising  Justice Ashok Bhushan  (Chairperson),   Barun Mitra (Technical Member) and   Arun Baroka (Technical Member)  concluded that “there is a debt in terms of Section 5(21) of the Code and that there is also a default in terms of Section 3(12) of the Code and also the debt is within the period of limitation and there is no dispute raised at any point of time. Therefore, the Adjudicating Authority has rightly come to the conclusion that it satisfies the requirement for admission under Section 9 for Corporate Insolvency Resolution Process.”

To Read the full text of the Order CLICK HERE

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