Corporate Insolvency Resolution Process cannot be initiated if the default arises within the exclusion period resulting from legislative safeguards during the pandemic.

ORDER

[Per se: Shri H.V.Subba Rao , Member (J)]

1. The above Company Petition is filed by Ujjawal Refinery Private Limited (Operational Creditor) seeking to initiate of Corporate Insolvency Resolution Process (CIRP) against Bhumi Cottex Industry Pvt Ltd. (Corporate Debtor) by invoking the provisions of Section 9 Insolvency and Bankruptcy Code, 2016 read with rule 6 of Insolvency & Bankruptcy (Application to Adjudication Authority) Rules, 2016 for a resolution of Operational Debt of Rs. 3,29,37,538/- (Rupees Three Crore Twenty-Nine Lacs Thirty-Seven Thousand Five Hundred and Thirty-Eight Only).

2. Brief facts as stated by the Petitioner are as follows:

2.1 The Operational Creditor and the Corporate Debtor were having commercial transactions since the year 2019. From 2019 to March 2020, the Operational Creditor had transferred an amount of Rs.5,48,12,538/- towards advance for purchase of raw material as per the oral purchase orders placed by the Operational Creditor from time to time.

2.2 However, in the month of April 2020, the Corporate Debtor due to its own reasons failed to supply the raw material to the Operational Creditor on time and hence, the Corporate Debtor informed the Operational Creditor that it would not be in position to supply the raw material due to Covid-19 situation and hence the Corporate Debtor would be refunding the entire advance amount paid by the Operational Creditor.

2.3 Accordingly, from 05.05.2020 to 30.09.2020, the Corporate Debtor transferred an amount of Rs. 2,18,75,000/- and sought time to refund the remaining amount within a period of 6 to 8 months. Considering the Covid-19 situation the Operational Creditor gave 6 to 8 months’ time to the Corporate Debtor to refund the advance payment.

2.4 In the month of March 2021, when the Operational Creditor requested the Corporate Debtor to refund the balance advance, the Corporate Debtor sought time till July 2021, for making the payments due to Covid-19. Considering the request of the Operational Creditor granted time till July 2021.

2.5 In the month of July 2021, the Corporate Debtor failed to make the payments and started avoiding to make the payments thereafter and hence, the Operational Creditor was left with no option but to issue the Demand notice u/s 8 of IBC.

2.6 On 14.09.2021, the Board of Directors of the Operational Creditor passed resolution for initiating legal process against the Corporate Debtor and passed a further resolution authorizing its Director Mr. Pavan Omprakash Panch to represent the Operational Creditor for taking all the necessary legal actions against Corporate Debtor.

2.7 On 15.09.2021, the Operational Creditor issued notice u/s 8 of the Code of 2016 and the Corporate Debtor failed to repay the outstanding dues nor gave any reply within 10 days as contemplated u/s 8(2) of the Code of 2016.

2.8 The said demand notice was received by the Corporate Debtor on 22.09.2021 itself, the Corporate Debtor issued a false and vague reply on 18.10.2021 i.e. after the statutory period of 10 days contemplated u/s 8(2) of the Code of 2016 and avoided to make the payments of the outstanding amount. Hence, this application.

3. The Respondent filed affidavit in reply dated 07.03.2022 opposing the above application stating that:

3.1 The captioned Petition filed by the Petitioner is without any basis and there is admittedly no debt due and payable by the Respondent to the Petitioner.

3.2 The Respondent Company is inter alia engaged in the business of production of cotton seed wash oil since 2012. The Respondent Company promoted Mr. Paresh N Runwal, had a good relationship with the Petitioner’s promoter, Mr. Nitin Panch, since 2015. The Petitioner and its sister concern