Case Note & Summary
The appeal was filed by Aquarius H2O Dynamics Private Limited (Corporate Debtor) against an order dated 29.11.2024 of the National Company Law Tribunal, Ahmedabad Bench-I, which admitted a Section 9 petition filed by M/s Riddhi Siddhi Metals (Operational Creditor) for initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for an alleged outstanding debt of Rs. 1,16,40,233/-. The Corporate Debtor had accepted goods without dispute and made partial payments but failed to clear the entire dues. The Operational Creditor issued a Section 8 demand notice on 19.03.2024. Before the Adjudicating Authority, the Corporate Debtor failed to appear despite notice and publication, leading to an ex-parte admission of the petition. The Appellant contended that the Operational Creditor deliberately suppressed payments of approximately Rs. 11 lakhs made before the demand notice, which if considered would bring the outstanding debt below the minimum threshold of Rs. 1 crore under Section 4 of the IBC, making the petition non-maintainable. The Appellant argued that the impugned order was obtained by fraud and misrepresentation. The NCLAT found that the Appellant had made a prima facie case of suppression of payments, as evidenced by bank statements annexed to the appeal. The Tribunal held that such suppression amounts to fraud on the court and that the Corporate Debtor was prevented from presenting its case due to non-appearance. Consequently, the impugned order was set aside, and the matter was remanded to the Adjudicating Authority for fresh consideration after giving the Corporate Debtor an opportunity to file a reply and be heard. The appeal was allowed.
Headnote
A) Insolvency and Bankruptcy Code - Section 9 Petition - Suppression of Payments - The Operational Creditor suppressed payments of approximately Rs. 11 lakhs made by the Corporate Debtor before issuance of demand notice, which if considered would reduce the outstanding debt below the minimum threshold of Rs. 1 crore under Section 4 of the Insolvency and Bankruptcy Code, 2016 - Held that such suppression amounts to fraud on the court and renders the Section 9 petition non-maintainable (Paras 4-6). B) Insolvency and Bankruptcy Code - Ex-parte Order - Non-Appearance of Corporate Debtor - The Adjudicating Authority admitted the Section 9 petition ex-parte due to non-appearance of the Corporate Debtor, but the Corporate Debtor was prevented from presenting its case - Held that the impugned order is set aside and the matter is remanded for fresh consideration after giving opportunity to the Corporate Debtor to file reply (Paras 7-8).
Issue of Consideration
Whether the Adjudicating Authority erred in admitting the Section 9 petition when the Operational Creditor suppressed payments made by the Corporate Debtor, potentially reducing the outstanding debt below the minimum threshold of Rs. 1 crore under Section 4 of the IBC.
Final Decision
The appeal is allowed. The impugned order dated 29.11.2024 is set aside. The matter is remanded to the Adjudicating Authority for fresh consideration after giving an opportunity to the Corporate Debtor to file a reply and be heard. The Adjudicating Authority is directed to decide the matter afresh in accordance with law.
Law Points
- Suppression of material facts
- Minimum threshold under Section 4 IBC
- Maintainability of Section 9 petition
- Fraud on court
- Ex-parte order set aside
