The National Company Law Tribunal ("NCLT"), Hyderabad Bench, comprising of Dr. Venkata Ramakrishna Badarinath Nandula (Judicial Member) and Shri Veera Brahma Rao Arekapudi (Technical Member), while adjudicating an application filed in NSL Krishnaveni Sugars Ltd v Trident Sugars Limited, has initiated Corporate Insolvency Resolution Process ("CIRP") against Trident Sugars Ltd. and...
The National Company Law Tribunal ("NCLT"), Hyderabad Bench, comprising of Dr. Venkata Ramakrishna Badarinath Nandula (Judicial Member) and Shri Veera Brahma Rao Arekapudi (Technical Member), while adjudicating an application filed in NSL Krishnaveni Sugars Ltd v Trident Sugars Limited, has initiated Corporate Insolvency Resolution Process ("CIRP") against Trident Sugars Ltd. and has appointed Mr. Medi Yadaiah as the Interim Resolution Professional (IRP).
Background Facts
NSL Krishnaveni Sugars Ltd. ("Operational Creditor") is a renowned manufacturer and supplier of sugar in South India. It is part of NSL Group of Companies and its plant is situated at Ramakrishnapur Village, Wanaprathi District.
The Operational Creditor had entered into an agreement dated 14.11.2019 with Trident Sugars Ltd. ("Corporate Debtor") for Molasses Purchase, whereby the latter was to supply Molasses to the tune of 10,000 MT by the end of March 2020 . The Operational Creditor was obligated to pay entire sale consideration price in advance by virtue of the terms of Agreement.
Thereafter, the Operational Creditor had paid Rs. 5,20,00,000/-, alongwith GST amounting to Rs. 58,24,000/-, to the Corporate Debtor. Subsequently, both parties by modifying few terms of the original Agreement underwent an Addendum Agreement dated 20.11.2019.
The Operational Creditor had performed its part of obligation in paying the entire amount where as Corporate Debtor had short supplied Molasses of 5051.715 MT against 10,000 MT. The last supply was made by the Corporate Debtor on 14.03.2020 and despite several reminders the Corporate Debtor failed to supply the balance quantity of Molasses.
Due to short supply of 5051.715 MT, the Operational Creditor procured 3500 MT from the open market and contended that it had the right to claim further Additional Cost from the Corporate Debtor for the remaining quantity.
The Operational Creditor issued a demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 ("IBC") to the Corporate Debtor on 01.08.2020 for a default of Rs.3,22,17,993/-, to which neither any response was received nor any dispute was raised. Subsequently, the Operational Creditor filed a petition under Section 9 of the IBC, seeking initiation of CIRP against the Corporate Debtor.
Contentions Of The Corporate Debtor
The Corporate Debtor contended that it was obligated to supply the agreed quantity by the end of the March 2020 and was therefore not liable to pay any additional amount to the Operational Creditor who had purchased from the open market before March 2020. Further, even after issuance of demand notice, the Corporate Debtor had supplied 862.975 MT of material. The entire quantity produced from the Corporate Debtor was supplied to the Operational Creditor but due to Covid-19 pandemic and resultant lock down from 22.03.2020, the operations at the factory were completely closed.
It was argued that the petition has been filed with intent to drag the Corporate Debtor into insolvency, which will be detrimental to the company and its employees. Maintainability of the petition was challenged over being hit by Section 10A of IBC which prohibits initiation of CIRP over a default that occurred between 25.03.2020 to 24.03.2021.
Contentions Of The Operational Creditor
The Operational Creditor argued that the petition was not hit by Section 10A of the IBC as the Corporate Debtor was supposed to supply 5000 MT of Molasses in December 2019 to January 2020; and another 5000 MT in February 2020 to March 2020. However, Corporate Debtor had only supplied a quantity of 3486.17 MT by January 2020. Since the default occurred prior to 25.03.2020, the Corporate Debtor cannot take shelter behind Section 10A.
Decision Of The NCLT
The Bench observed that the Petition was filed for a default of Rs.3,22,17,993/-, however, Corporate Debtor had paid a sum of Rs.1,50,00,000/- to the Operational Creditor thereafter, thus the present default was Rs.1,72,19,993/-.
It was observed that the Corporate Debtor had neither paid the balance amount nor raised any dispute in respect of the quantity or the amount at any point of time. There being no pre-existing dispute, the Bench initiated CIRP against the Corporate Debtor and appointed Mr. Medi Yadaiah as the Interim Resolution Professional (IRP).
Case Title: NSL Krishnaveni Sugars Ltd v Trident Sugars Limited, CP (IB) No. 331/9/HDB/2020
Counsel For the Petitioner: Shri. S.Keshava Rao, Advocate
Counsel For the Respondent: Shri M.Vazra Laxmi, Advocate