2017 (4) TMI 1399 - Tri - Insolvency and Bankruptcy

Petition under the provisions of Insolvency and Bankruptcy code,2016 in the capacity of Operational Creditor - existence of Default - Held that - There is an existence of debt as defined under Section 3(11) of the Code, means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. Further it is held that default exists as defined under section 3(12) of the code means non-payment of debt when whole or any part or installment of the amount of debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the case may be. Once it is established as per the foregoing paragraphs that there was an existence of Default then the provisions of section 8 of the code shall come into operation. It is prescribed that an operational creditor on occurrence of a default deliver a Demand Notice of unpaid operational Debt or copy of an invoice demanding payment of the amount involved in the default to the Corporate Debtor as prescribed. Although in Sub-Section (2) of Section 8 a Corporate Debtor is authorized to establish the existence of a dispute within a period of 1 0 days on the receipt of the Demand Notice, but in the present case the Operational Debtor , had not responded at all. Due to this reason the provisions of section 9 of the code shall come into operation. The Petitioner has intimated the name of Interim Resolution Professional to initiate the Insolvency Resolution process. s a consequence, once the process has been initiated, the provisions of Moratorium as prescribed under Section 14 of the Code shall be operative henceforth with effect from 11.04.2017 shall be applicable by prohibiting institution of any Suit before a Court of Law, transferring/encumbering any of the assets of the Debtor etc. However, the supply of essential goods or services to the Corporate Debtor shall not be terminated during Moratorium period.

Summary

Issues:
- Petition filed under Insolvency and Bankruptcy Code, 2016 by the Operational Creditor.
- Determination of whether professional services provided by a Chartered Accountant constitute "Operational Debt" under the Code.
- Examination of the existence of debt and default as defined under the Code.
- Analysis of the provisions of sections 8 and 9 of the Code regarding the Demand Notice and initiation of Corporate Insolvency Resolution Process.
- Appointment of an Interim Resolution Professional and the implications of Moratorium under Section 14 of the Code.
- Obligations of the Interim Resolution Professional under Section 18 of the Code.

Detailed Analysis:

1. The Petitioner filed a petition under the Insolvency and Bankruptcy Code, 2016 as an Operational Creditor, citing non-payment of professional and advisory services by the Corporate Debtor. Attempts were made to serve the Petition through various means, including registered post and email.

2. The key issue addressed was whether the professional services provided by the Chartered Accountant fell under the definition of "Operational Debt" as per Section 5(21) of the Code. The Tribunal held that professional services constitute "services" as defined in the Code, making the debt claim eligible for adjudication under the Code.

3. The Tribunal examined the existence of debt and default as defined under the Code, determining that the Petitioner's claim met the criteria for both debt and default under Sections 3(11) and 3(12) of the Code.

4. Provisions of sections 8 and 9 of the Code were analyzed concerning the Demand Notice and the initiation of the Corporate Insolvency Resolution Process. Despite the Operational Debtor's non-response, the Tribunal found grounds for initiating the resolution process.

5. An Interim Resolution Professional was appointed to oversee the resolution process, with specific duties and responsibilities outlined under Section 18 of the Code. The implications of Moratorium under Section 14 were discussed, prohibiting certain actions during the resolution process.

6. The Tribunal directed the Interim Resolution Professional to provide updates on the progress of the Resolution Plan and compliance with the Order. The petition was admitted and disposed of based on the terms outlined in the judgment.