# In the matter of IRAA Clothing Private Limited

> NCLT judgment dated 2023-08-25. Citation: TCN-2023-NCLT-01918. Rajat Textiles, the Operational Creditor, filed a company petition under Section 9 of the…

- **Court:** NCLT
- **Order date:** 25 Aug 2023
- **Citation:** TCN-2023-NCLT-01918
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/iraa-clothing-private-limited-6bdc8c85

## Summary

### Background

Rajat Textiles, the Operational Creditor, filed a company petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against IRAA Clothing Private Limited, the Corporate Debtor. The Operational Creditor alleged that the Corporate Debtor defaulted in making payments for goods supplied. The Operational Creditor and Corporate Debtor had a 'Demand & Supply' arrangement in 2017, where the Corporate Debtor would issue purchase orders, and the Operational Creditor would deliver the products. Upon delivery, the Operational Creditor would raise tax invoices. The Corporate Debtor failed to make payments against these invoices.

## Facts

Rajat Textiles (Operational Creditor) filed a petition against IRAA Clothing Private Limited (Corporate Debtor) under Section 9 of the IBC, 2016, seeking to initiate CIRP due to unpaid dues. In 2017, both parties entered into a 'Demand & Supply' arrangement where the Corporate Debtor would issue purchase orders, and the Operational Creditor would deliver goods, raising tax invoices upon delivery. The Operational Creditor raised several tax invoices between 2019 and 2023, totaling Rs. 1,60,81,448.44/-. Despite email reminders and a legal notice, the Corporate Debtor failed to make payments. The Corporate Debtor cited financial difficulties due to the Covid-19 pandemic as the reason for non-payment, stating significant losses in the financial year 2020-2021. However,

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## Issues and analysis

### Issue 1: Whether the Corporate Debtor defaulted in making …

**Ratio:** A default occurs when a debt has become due

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**Reasoning:** The court found that the Operational Creditor had provided sufficient evidence of unpaid

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**Interpretation:** The term 'default' under the IBC refers to the non-payment of a debt when it

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**Application:** In this case, the Operational Creditor presented invoices and communications

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## Parties

- **Judges:** ANIL RAJ C…; Kuldip Kumar…
- **Appellants:** Rajat Tex…
- **Respondents:** IRAA Clothing…

## Timeline

- **2017-01-01 — Demand & Supply…**: Operational Creditor and Corporate Debtor…
- **2019-10-10 — Email Rem…**: Operational Creditor sent several email reminders to Corporate Debtor regarding…

## 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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