# In the matter of IRAA Clothing Private Limited

> NCLT judgment dated 2023-08-25. Citation: TCN-2023-NCLT-01903. Rajat Textiles, the Operational Creditor, filed a petition under Section 9 of the Insolvency…

- **Court:** NCLT
- **Order date:** 25 Aug 2023
- **Citation:** TCN-2023-NCLT-01903
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/iraa-clothing-private-limited-a8fe4ee5

## Summary

### Background

Rajat Textiles, the Operational Creditor, filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against IRAA Clothing Private Limited, the Corporate Debtor. The Operational Creditor claimed that the Corporate Debtor defaulted in making payments amounting to Rs. 1,60,81,448.44/-. The Operational Creditor and the Corporate Debtor had a 'Demand & Supply' arrangement since 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.

## Facts

Rajat Textiles, a partnership firm, is the Operational Creditor. IRAA Clothing Private Limited is the Corporate Debtor. In 2017, the Operational Creditor and Corporate Debtor entered into a 'Demand & Supply' arrangement. The Corporate Debtor would issue Purchase Orders, and the Operational Creditor would deliver products as per the Purchase Orders. The Operational Creditor raised tax invoices for the delivered goods. The Corporate Debtor failed to make payments against these invoices. The Operational Creditor sent several emails and reminders between 10.10.2019 and 25.05.2021. The Corporate Debtor replied on 19.10.2022 stating that their bank accounts were frozen. The Operational Creditor issued a legal notice dated 31.01.2023, demanding payment of Rs.

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## Issues and analysis

### Issue 1: Whether the Corporate Debtor committed a default in …

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

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**Reasoning:** The court observed that the Corporate Debtor had admitted its liability to pay the

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**Interpretation:** The legal principle of default under the IBC requires that a debt is due and

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**Application:** In this case, the Corporate Debtor's admission of liability, coupled with the

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## Parties

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

## Timeline

- **2017-01-01 — Demand & Supply…**: The Operational Creditor and the Corporate Debtor entered into a 'Demand & Supply'…
- **2019-10-10 — Emails and Re…**: The Operational Creditor sent several emails and reminders to the Corporate Debtor…

## 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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