2020 (1) TMI 1275 - 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 - Having failed to get the outstanding payments from the respondent the applicant was compelled to issue demand notice under section 8 of I B Code on 07.06.2019. Record also shows that the respondent has not raised any dispute against the demand notice so issued by the applicant - On perusal of the record it is found that the petition is complete in all respect. This adjudicating authority is of the considered view that operational debt is due and payable to the Applicant and it fulfilled the requirement of IB Code as enshrined in the Code. 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 there is/are occurrence of default on the part of the corporate debtor 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 - it is a fit case to initiate Insolvency Resolution Process by admitting the Application under Section 9(5)(1) of the Code. Petition admitted - moratorium declared.

Issues:
1. Application under Section 9 of The Insolvency and Bankruptcy Code, 2016.
2. Existence of operational debt and default in payment.
3. Admissibility of the petition and appointment of an interim resolution professional.
4. Declaration of moratorium and initiation of the insolvency resolution process.

Issue 1: Application under Section 9 of The Insolvency and Bankruptcy Code, 2016
The operational creditor filed a petition under Section 9 of The Insolvency and Bankruptcy Code, 2016, along with Rule 6 of The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The operational creditor, a partnership firm, alleged that the respondent, a private limited company, was in default of a significant amount along with interest. The respondent had not raised any dispute regarding the outstanding dues, and the operational creditor had issued a demand notice under section 8 of the Code.

Issue 2: Existence of operational debt and default in payment
The operational creditor detailed the transactions with the respondent and its sister concern, indicating a substantial outstanding amount. Despite reminders and promises from the respondent to clear the dues, the operational creditor did not receive the payments. The respondent admitted the outstanding amount but failed to settle it. The operational creditor established the debt, occurrence of default, and non-payment by the corporate debtor, meeting the requirements of the Insolvency & Bankruptcy Code.

Issue 3: Admissibility of the petition and appointment of an interim resolution professional
The respondent did not file a reply despite opportunities and adjournments, leading to the closure of the right to file a reply. The applicant issued a demand notice under section 8 of the Code, which the respondent did not dispute. The tribunal found the petition complete and in compliance with the necessary documentation, including invoices, demand notices, and statements. Citing a Supreme Court judgment, the tribunal concluded that the operational debt was due and payable, fulfilling the requirements of the Insolvency & Bankruptcy Code. Consequently, the tribunal admitted the petition and declared a moratorium, appointing an interim resolution professional.

Issue 4: Declaration of moratorium and initiation of the insolvency resolution process
The tribunal, in line with the provisions of the Insolvency & Bankruptcy Code, declared a moratorium, prohibiting certain actions against the corporate debtor. It directed the interim resolution professional to make a public announcement and call for submission of claims. The moratorium would remain in effect until the completion of the insolvency resolution process or until a resolution plan is approved or liquidation is ordered. The tribunal appointed an interim resolution professional and communicated the order to the relevant parties, ensuring compliance with the insolvency resolution process.

This detailed analysis of the judgment highlights the key legal aspects, including the application under Section 9 of the Code, the establishment of operational debt and default, the admissibility of the petition, and the declaration of moratorium for initiating the insolvency resolution process.

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