NCLT Rejects 'Res Judicata' Defense, Admits Insolvency Plea Against Proto D Industries
The Tribunal characterized the debtor's claim of a pre-existing dispute as 'moonshine' (baseless), noting that no evidence was produced to establish such a dispute existed prior to the issuance of the demand notice.
The Mumbai Bench of the National Company Law Tribunal (NCLT) has admitted an application under Section 9 of the Insolvency and Bankruptcy Code (IBC) against Proto D Industries Private Limited, holding that the operational creditor had established a default of over Rs. 5.8 crore and the corporate debtor had failed to prove any 'pre-existing dispute'. The application was filed by...
The Mumbai Bench of the National Company Law Tribunal (NCLT) has admitted an application under Section 9 of the Insolvency and Bankruptcy Code (IBC) against Proto D Industries Private Limited, holding that the operational creditor had established a default of over Rs. 5.8 crore and the corporate debtor had failed to prove any 'pre-existing dispute'.
The application was filed by Rexel India Private Limited, the Applicant (Operational Creditor) under Section 9 of the Insolvency and Bankruptcy Code, 2016 ( "the Code") read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 ( "the AAA Rules"). The Application is signed by Mr. Suraj Alhat authorised vide Board Resolution dated 24.01.2024 for initiating Corporate Insolvency Resolution Process ( "CIRP") in respect of Proto D Industries Private Limited, the Corporate Debtor (CD).
The Tribunal, comprising Judicial Member Shri Nilesh Sharma and Technical Member Shri Sameer Kakar, rejected the debtor's primary contention that the application was barred by the doctrine of 'res judicata' due to pending proceedings under Section 138of the Negotiable Instruments Act (NI Act) for dishonoured cheques.
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The bench pointed that proceedings under the NI Act are quasi-criminal in nature and fundamentally distinct from the civil proceedings under the IBC, which is a beneficial legislation aimed at reviving a corporate debtor, not merely a recovery tool. Consequently, the pendency of a criminal case does not bar the initiation of a Corporate Insolvency Resolution Process (CIRP).
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The applicant had supplied goods to the debtor between April and May 2023, and the debt was acknowledged by the debtor's directors in a written undertaking dated July 24, 2023. The Tribunal characterized the debtor's claim of a pre-existing dispute as 'moonshine' (baseless), noting that no evidence was produced to establish such a dispute existed prior to the issuance of the demand notice.
Finding all pre-requisites of Section 9 fulfilled, the Tribunal admitted the application, declared a moratorium under Section 14 of the IBC, and appointed Mr. Rishabh Sethi as the Insolvency Resolution Professional to manage the CIRP.
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