# In the matter of Worldstar Fabric LLP CP No. 1976-I&BP-2018

> NCLT judgment dated 2018-08-28. Citation: TCN-2018-NCLT-00887. Shanaya Fashions filed a company petition under Section 9 of the Insolvency and Bankruptcy Code…

- **Court:** NCLT
- **Order date:** 28 Aug 2018
- **Citation:** TCN-2018-NCLT-00887
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/worldstar-fabric-llp-cp-no-1976-ibp-2018-61ab72d6

## Summary

### Background

Shanaya Fashions filed a company petition under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against Worldstar Fabric LLP, the Corporate Debtor. The petition alleges that the Corporate Debtor defaulted on payments amounting to Rs. 2,56,30,190/- against various invoices raised by Shanaya Fashions. The invoices were for goods supplied between January 1, 2018, and March 5, 2018. The petitioner issued a demand notice, and the corporate debtor replied, citing financial difficulties and customer defaults as reasons for non-payment.

## Facts

Shanaya Fashions (the Petitioner) is a manufacturer of wearing apparel. Worldstar Fabric LLP (the Corporate Debtor) placed orders with Shanaya Fashions. Shanaya Fashions supplied and delivered goods to Worldstar Fabric LLP between January 1, 2018, and March 5, 2018, raising 24 invoices totaling Rs. 2,59,30,190/-, payable within 7 days of the invoice date. Worldstar Fabric LLP defaulted on payments. Shanaya Fashions issued a demand notice on May 9, 2018, claiming Rs. 2,59,30,190/-. Worldstar Fabric LLP replied on May 11, 2018, citing financial difficulties and customer defaults as reasons for non-payment. Worldstar Fabric LLP also raised issues of defective goods and short supply in its reply, which the court deemed unsubstantiated. The Corporate Debtor's reply was

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## Issues and analysis

### Issue 1: Whether the Corporate Debtor's financial difficulties can be a valid defense against an I&B …

**Ratio:** Financial difficulties alone do not constitute a valid defense against an insolvency

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**Reasoning:** The court reasoned that the Corporate Debtor's financial difficulties, stemming from

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**Interpretation:** The IBC prioritizes the resolution of insolvency and recovery of debts.

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**Application:** The court applied this principle by rejecting the Corporate Debtor's argument

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## Parties

- **Judges:** Bhaskara Pantula…; V. Nallasen…
- **Appellants:** Shanaya Fa…
- **Respondents:** Worldstar Fabrics…

## Timeline

- **2018-01-01 — Goods Sup…**: Shanaya Fashions supplied and…
- **2018-03-05 — Last Date of…**: Last date of goods supplied and delivered by…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 9 — Application for initiation of corporate insolvency…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-9)

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