2018 (5) TMI 1893 - Tri - Insolvency and Bankruptcy

Initiation of CIRP - Nature of Debt - Operational Debt or not - Default as defined under section 3(12) of The Code - HELD THAT - Having admitted the Petition/Application, the provisions of Moratorium as prescribed under Section 14 of the Code shall be operative henceforth with effect from the date of appointment of IRP 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. It shall be effective till completion of the Insolvency Resolution Process or until the approval of the Resolution Plan prescribed under Section 31 of the Code. That as prescribed under Section 13 of the Code on declaration of Moratorium the next step of Public Announcement of the Initiation of Corporate Insolvency Resolution Process shall be carried out by the IRP immediately on appointment, as per the provisions of the Code. Petition is hereby Admitted .

Summary

Issues:
1. Application for insolvency filed by Operational Creditor.
2. Nature of debt and default by the Debtor.
3. Compliance with the provisions of the Insolvency and Bankruptcy Code.
4. Appointment of Interim Resolution Professional.
5. Moratorium and its implications.
6. Public Announcement and compliance by the IRP.

Analysis:
1. The Operational Creditor filed an application invoking Section 9 of the Insolvency and Bankruptcy Code, stating the details of the Corporate Debtor and the operational debt amounting to USD 880,331.22 along with interest. The Debtor failed to pay for services rendered, despite acknowledging the liability in an email. A demand notice was issued, and the Debtor did not respond, leading to the application for insolvency.

2. The Tribunal found that the Operational Creditor had established the operational debt and default by the Debtor as defined under the Code. The notice under Section 8(2) was received by the Debtor, who did not dispute the debt within the prescribed time, indicating no dispute existed. The Affidavit of Service confirmed proper notice delivery.

3. Based on the evidence, the Tribunal admitted the application as the Debtor did not contest the debt, and the formalities under the Code were completed. An Interim Resolution Professional was appointed, and another application against the same Debtor was deemed infructuous due to the admission of the current application.

4. The Tribunal's decision triggered the provisions of Moratorium under Section 14 of the Code, prohibiting legal actions against the Debtor while ensuring the supply of essential goods or services continues. The appointed IRP was directed to make a public announcement and comply with other Code provisions, providing progress reports to the Tribunal.

5. The IRP was instructed to inform the progress of the Resolution Plan within 30 days of appointment, with the liberty to report earlier if necessary. The Petition was admitted, and the Corporate Insolvency Resolution Process commenced from the date of the order, ensuring compliance with the Code's provisions for insolvency proceedings.