2020 (1) TMI 1252 - 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 - The objections raised by the corporate debtor are imaginary and not supported by any documents, whereas, the documents produced on record by the operational creditor is enough to establish that operational debt is due and payable to the applicant from the respondent which was acknowledged on 03.06.2015 and thereafter also made some payment from time to time on instructions of corporate debtor. On perusal of the records it is found that Annexure R-10 (page No. 125) to the affidavit in reply is a letter dated 2nd March, 2017, addressed to the applicant by the respondent stating that the corporate debtor has diverted its funds to its another joint venture viz. PPESPL and seeking more time for settling the outstanding debt - On perusal of the records it is found that at page No. 15 to the application, the petitioner has provided a copy of the invoice dated 07.01.2014 reflecting the details of order placed by the corporate debtor vis-a-vis the terms of payment - thus, the respondent has defaulted in payment of the debt and has admitted the operational debt from time to time. This adjudicating authority is of the considered view that operational debt is due to the Applicant and it fulfilled the requirement of I B Code. That, service is complete and no dispute has been raised by the respondent at any point of time. That, Applicant is an Operational Creditor within the meaning of Section 5 sub-section 20 of the Code. From the aforesaid material on record, petitioner is able to establish that there exists debt as well as occurrence of default and the amount claimed by operational creditor is payable in law by the corporate debtor as the same is not barred by any law of limitation and/or any other law for the time being in force. Application admitted - moratorium declared.

Summary

Issues Involved:
1. Maintainability of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Existence of operational debt and default.
3. Objections raised by the corporate debtor regarding solvency and dispute.
4. Role and rights of third-party interveners in insolvency proceedings.

Detailed Analysis:

1. Maintainability of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The petition was filed by an authorized representative of the operational creditor, M/s. POSCO India Pune Processing Center Private Limited, 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 claimed a total debt of ?16,08,45,996/- as of April 30, 2018, including interest. The corporate debtor acknowledged the debt and agreed to pay interest at 10.5% per annum from June 1, 2015, but failed to honor the repayment commitment.

2. Existence of operational debt and default:
The tribunal examined the documents submitted by the petitioner, including the demand notice, acknowledgment of debt, and other supporting documents. It was found that the corporate debtor had acknowledged the debt in a letter dated June 3, 2015, and made certain ad-hoc payments, which were adjusted against the outstanding dues. Despite these payments, the corporate debtor failed to clear the total outstanding amount. The tribunal concluded that the operational debt was due and payable, and the corporate debtor had defaulted on the payment.

3. Objections raised by the corporate debtor regarding solvency and dispute:
The corporate debtor argued that it was a solvent company with sufficient reserves and surplus, and that initiating insolvency proceedings would frustrate the objective of the Insolvency and Bankruptcy Code. The debtor also claimed that the petition was time-barred and there was no default. However, the tribunal found these objections to be unsupported by any documents. The tribunal referred to the letter dated June 3, 2015, where the corporate debtor acknowledged the debt and agreed to pay it in installments. The tribunal determined that there was no genuine dispute regarding the operational debt, and the amount claimed was due and payable.

4. Role and rights of third-party interveners in insolvency proceedings:
During the proceedings, an intervening petition was filed by UCO Bank, arguing that admitting the application under Section 9 would create unnecessary burden and financial loss to the stakeholders, including secured creditors. The tribunal referred to the judgment in Axis Bank Ltd. v. Lotus Three Developments Ltd., which stated that no person other than the corporate debtor has a right to be heard at the stage of admission of the application under Sections 7 and 9 of the Insolvency and Bankruptcy Code. Consequently, the tribunal rejected the intervention petition filed by UCO Bank, stating that third parties do not have the right to intervene in such proceedings.

Conclusion:
The tribunal admitted the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, and declared a moratorium prohibiting certain actions against the corporate debtor. The tribunal appointed an Interim Resolution Professional to initiate the Corporate Insolvency Resolution Process and make a public announcement for submission of claims. The order of moratorium would remain in effect until the completion of the corporate insolvency resolution process or until further orders. The tribunal also directed the registry to inform the Registrar of Companies about the initiation of the insolvency process to prevent any proceedings for striking off the name of the respondent company.