2019 (9) TMI 1294 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of debt - existence of debt and dispute or not - it was submitted that the Applicant should have invoked the Arbitration Clause prior to filing of any case/application with the Hon'ble (NCLT) or any other Court - HELD THAT - The present Application is complete and the Applicant is entitled to claim its dues, establishing the default in payment of the Operational Debt beyond doubt and there is no tenable ground to reject this application. Therefore, the present Application deserves to be admitted and this Application is admitted. Application admitted - moratorium declared.

Summary

Issues:
1. Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.
2. Dispute over the outstanding amount claimed by the Operational Creditor.
3. Corporate Debtor's submission regarding the closure decision by the Central Cabinet.
4. Corporate Debtor's argument invoking the Arbitration Clause.
5. Appointment of Interim Resolution Professional and consequences of initiating Corporate Insolvency Resolution Process.

Analysis:

1. The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the Operational Creditor, claiming to be owed an outstanding amount by the Corporate Debtor. The Operational Creditor provided details of the supply agreement and invoices, along with proof of demand notice served on the Corporate Debtor.

2. The Operational Creditor claimed an outstanding amount of ?9,87,988.35, while the Corporate Debtor disputed the exact amount owed, stating it as ?9,85,886. The Corporate Debtor argued against the Operational Creditor claiming interest, citing absence of such a provision in the agreement.

3. The Corporate Debtor raised the issue of a decision by the Central Cabinet to close the company and cleanse its balance sheet by selling surplus land. The Corporate Debtor mentioned that all liabilities, including the amount due to the Operational Creditor, would be met through budgetary support if approved by the Government.

4. The Corporate Debtor invoked the Arbitration Clause in the agreement, contending that the dispute should have been referred to arbitration before filing the application. However, the Tribunal held that under Section 238 of the IBC, the provisions of the Code would prevail over any inconsistency with other laws.

5. The Tribunal admitted the application, appointed an Interim Resolution Professional, and invoked the moratorium under Section 14 of the IBC. The IRP was directed to carry out the Corporate Insolvency Resolution Process, and the Operational Creditor was instructed to deposit a sum for the IRP's expenses. The management of the Corporate Debtor's affairs was to vest with the IRP, and the decision was communicated to all relevant parties.

This comprehensive analysis covers the key issues and the Tribunal's decision in the legal judgment.