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2020 (9) TMI 1205 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Appeal under Section 37 of Arbitration and Conciliation Act, 1996 was pending challenging the award, on the date on which the operational debt became due against the Corporate Debtor, or not? - HELD THAT - From the plain reading of un-disputed facts in this proceeding, it is clear that on the date on which the Corporate Debtor was served with demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 or on the date on which the application is filed against the Corporate Debtor, no arbitration proceedings was pending challenging the award. Operational debt become due and payable on 29.02.2012 i.e on the date of which the Learned District Judge confirmed the award under Section 34 of A C Act. The Corporate Debtor filed Appeal under Section 37 of the Act. It was dismissed in default. 90 days thereafter, on 14.02.2020, Operational Creditor gave the Corporate Debtor notice under Section 9 of the Insolvency and Bankruptcy Code, 2016. On 28.02.2020 - the operational creditor sent a demand notice three months after the Corporate debtor's appeal was dismissed by Hon'ble high Court. As soon as the Corporate Debtor received the demand notice, its officers swung into action and get the appeal restored. Meantime, the operational creditor had filed this application. It appears from record that the officers of the Corporate Debtor using the proceedings under the law either to delay or to avoid the legitimate dues of the Corporate Debtor on one or the other ground. Operational Creditor has established that the Corporate Debtor committed default in paying the operational debt of ₹ 5,62,01,258/- inspite of receipt of demand notice. There was no dispute pending (by way of arbitral proceeding or otherwise) on the date on which the default occurred or on the date on which the application is filed to initiate Corporate Insolvency Resolution Process of the Corporate Debtor - Also, no disciplinary proceeding is pending against the proposed Insolvency Resolution Professional. It is not in dispute that the corporate debtor did not pay the operational debts. Application admitted - moratorium declared.
Issues Involved:
1. Whether the operational debt was due and payable by the Corporate Debtor. 2. Whether the pending appeal under Section 37 of the Arbitration and Conciliation Act, 1996 constitutes a "dispute" under the Insolvency and Bankruptcy Code, 2016. 3. Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 is maintainable. Detailed Analysis: 1. Whether the operational debt was due and payable by the Corporate Debtor: The Operational Creditor, M/s. Jai Balaji Industries Limited, filed applications under Section 9 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor, M/s. Orissa Minerals Development Company Limited, for defaulting on operational debts amounting to ?7,75,1684/- and ?5,62,01,258/-. The Tribunal noted that the facts were largely undisputed, including the existence of a Memorandum of Understanding (MOU) for the supply of iron ore, an arbitration award in favor of the Operational Creditor, and the subsequent confirmation of the award by the District Court, Barasat. The Corporate Debtor's appeal against the award was dismissed in default by the Calcutta High Court, making the operational debt due and payable. 2. Whether the pending appeal under Section 37 of the Arbitration and Conciliation Act, 1996 constitutes a "dispute" under the Insolvency and Bankruptcy Code, 2016: The Corporate Debtor argued that the proceedings under Section 9 were not maintainable as their appeal against the arbitration award was pending. However, the Tribunal found that on the date of filing the application under Section 9, no appeal was pending because the High Court had dismissed the appeal in default, and the restoration occurred after the application was filed. The Tribunal referred to the Supreme Court's ruling in K. Kishan Vs. Vijay Nirman Company Private Limited, which held that a pending appeal under Section 37 of the Arbitration and Conciliation Act could constitute a "dispute." However, since no appeal was pending at the time of the application, the Tribunal concluded that there was no "dispute" as defined under Section 5(6) of the Insolvency and Bankruptcy Code, 2016. 3. Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 is maintainable: The Tribunal determined that the application was maintainable as the operational debt was due and there was no pending "dispute" at the time of the application. The Corporate Debtor's actions to restore the appeal after receiving the demand notice were seen as attempts to delay or avoid payment. The Tribunal emphasized that the operational creditor had established the Corporate Debtor's default in paying the operational debt despite receiving the demand notice. Conclusion: The Tribunal admitted the Corporate Debtor into the Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016, and declared a moratorium under Section 14. The Tribunal appointed an Interim Resolution Professional (IRP) and directed the IRP to make a public announcement of the initiation of CIRP and call for claims. The Tribunal also directed the Operational Creditor to pay an advance to the IRP for the smooth conduct of the CIRP and allowed the Operational Creditor to submit its claim in the proceedings. Order: 1. Corporate Debtor M/s. Orissa Minerals Development Company Ltd. is admitted into CIRP. 2. A moratorium under Section 14 is declared. 3. Mr. Sandip Choraria is appointed as the IRP. 4. The IRP is directed to perform duties as per the Insolvency and Bankruptcy Code, 2016. 5. The IRP is to make a public announcement and call for claims. 6. The supply of goods/services to the Corporate Debtor shall not be interrupted during the moratorium. 7. The IRP shall protect and manage the Corporate Debtor's property and operations. 8. The Operational Creditor is to pay an advance of ?1,00,000/- to the IRP. 9. The Registry is directed to communicate the order to relevant parties and upload it on the website. 10. CP(IB) 688/KB/2020 is allowed. 11. CP(IB) No. 676/KB/2020 is disposed of with liberty to the Operational Creditor to submit its claim. 12. The matter is listed for further consideration on 02.12.2020.
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