2018 (6) TMI 1701 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - Counsel for the corporate debtor has been fair enough to admit that the corporate debtor has not taken any step after completion of the term of the JDA either to make payment or to make any communication till the receiving of the notice under section 8(1) of the I and B Code, 2016, which has been sent to the corporate debtor on March 8, 2018. It appears that the corporate debtor has come up with a frivolous defence after receiving notice under section 8(1) of the I and B Code, 2016 and has not made any payment/communication to the operational creditor as was envisaged as per the terms and conditions of the JDA - it is safely concluded that the corporate debtor has defaulted in making payments to the operational creditor. The operational creditor has complied with section 9(3)(b) and (c) of the I and B Code, 2016, by filing affidavit, where it has been deposed that the stand taken by the corporate debtor in its reply dated March 21, 2018 is a mere afterthought and as such, none of the claims so made in the reply were ever made prior to the same - The operational creditor has fulfilled all the requirements of law for admission of the application. This authority is satisfied that the corporate debtor has committed default in making payment of the outstanding debt claimed by the operational creditor. Application is admitted and the commencement of the corporate insolvency resolution process is ordered which ordinarily shall get completed within 180 days, reckoning from the day this order is passed - moratorium declared.

Issues Involved:
1. Admissibility of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Existence of debt and default.
3. Compliance with legal requirements for initiating corporate insolvency resolution process.
4. Validity of the arbitration clause as a defense.
5. Declaration of moratorium and appointment of Interim Resolution Professional (IRP).

Issue-wise Detailed Analysis:

1. Admissibility of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The application was filed by the operational creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The operational creditor sought to initiate the corporate insolvency resolution process (CIRP) against the corporate debtor, declare a moratorium, and appoint an Interim Resolution Professional (IRP).

2. Existence of debt and default:
The operational creditor claimed an outstanding debt totaling ?28,40,21,459, which included a principal amount of ?27,69,21,200 and an interest amount of ?71,00,259 as of January 16, 2018. The debt arose from a Joint Development Agreement (JDA) dated November 9, 2015, between the operational creditor and the corporate debtor. The operational creditor alleged that the corporate debtor had defaulted on making due payments as per the terms of the JDA and its supplementary agreement dated February 6, 2017.

3. Compliance with legal requirements for initiating corporate insolvency resolution process:
The operational creditor issued a demand notice dated March 8, 2017, under Section 8(1) of the I and B Code, 2016, to which the corporate debtor replied on March 21, 2018, denying the completion of the project by the operational creditor. Despite the corporate debtor's defense, the tribunal found that the operational creditor had complied with Section 9(3)(b) and (c) of the I and B Code, 2016, by filing the necessary affidavit and bank statements.

4. Validity of the arbitration clause as a defense:
The corporate debtor argued that the operational creditor should have resorted to arbitration as per the JDA instead of filing the application under Section 9 of the I and B Code, 2016. However, the tribunal rejected this defense, stating that the arbitration clause does not bar the operational creditor from invoking the provisions of Section 9 of the I and B Code, 2016. The tribunal noted that the corporate debtor had issued advertisements for the sale of plots completed by the operational creditor, supporting the operational creditor's claim of project completion.

5. Declaration of moratorium and appointment of Interim Resolution Professional (IRP):
The tribunal admitted the application and ordered the commencement of the corporate insolvency resolution process, which should be completed within 180 days from the date of the order. A moratorium was declared, prohibiting the institution or continuation of suits or proceedings against the corporate debtor, transferring or disposing of assets, and recovering property. Mr. Radhakrishnan Dharmarajan was appointed as the IRP, and he was directed to take charge of the corporate debtor's management immediately and comply with the provisions of Sections 13(2), 15, 17, and 18 of the I and B Code, 2016.

Conclusion:
The tribunal concluded that the corporate debtor had defaulted in making payments to the operational creditor and admitted the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The corporate insolvency resolution process was initiated, a moratorium was declared, and an IRP was appointed to take charge of the corporate debtor's management.

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