2018 (4) TMI 1890 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to liquidate its financial debts - Operational Creditors - existence of debt and dispute or not - service of demand notice - HELD THAT - The present petition has been filed in the required format through its duly authorised signatory and has complied with the mandatory requirements under the Code including issuance of a demand notice to which no reply was given. The copies of the invoices have also been annexed - On being served the Corporate Debtor put in its appearance through their advocate and made a categorical statement that they admit the outstanding liability but are unable to repay the same. The demand notice under Section 8 was also issued prior to the filing of the present petition and no dispute was raised in respect of the same. In View Of the admitted liability Of a financial debt towards the Operational Creditor, the prayer of the Petitioner merits consideration - Petition admitted - moratorium declared.

Summary

Issues:
1. Petition under Section 9 of the IBC by operational creditor for initiation of Corporate Insolvency Resolution Process due to the inability of the Corporate Debtor to liquidate financial debts.
2. Confirmation of outstanding liability by the Corporate Debtor but failure to repay, leading to invocation of the Code.
3. Compliance with mandatory requirements under the Code, including issuance of demand notice and submission of invoices.
4. Admission of outstanding liability by the Corporate Debtor but inability to repay.
5. Imposition of moratorium under Section 14 and appointment of an Interim Resolution Professional (IRP).

Issue 1:
The petitioner, an operational creditor, filed a petition under Section 9 of the Insolvency and Bankruptcy Code (IBC) seeking to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor due to its failure to liquidate financial debts. The Operational Creditor maintained a running account, claiming a significant sum due from the Corporate Debtor. Despite the Corporate Debtor's admission of liability, no steps were taken to settle the outstanding amount, prompting the Operational Creditor to invoke the provisions of the Code through the present petition.

Issue 2:
The Corporate Debtor acknowledged its liability towards the Operational Creditor, yet expressed its inability to repay the outstanding amount. The Corporate Debtor issued cheques that were subsequently dishonored, indicating a failure to honor their financial obligations. The petition, filed in the prescribed format and meeting all mandatory requirements under the Code, highlighted the Corporate Debtor's default in responding to the demand notice and provided supporting documentation, including invoices, to substantiate the claim.

Issue 3:
Upon being served, the Corporate Debtor admitted the outstanding liability but cited an inability to settle the debt. The Corporate Debtor did not raise any dispute regarding the demand notice issued under Section 8 before the petition was filed. Given the admitted financial debt owed to the Operational Creditor, the Tribunal found merit in the petitioner's prayer and admitted the petition, leading to the imposition of a moratorium under Section 14 of the Code.

Issue 4:
In light of the admitted liability towards the Operational Creditor, the Tribunal imposed a moratorium under Section 14 of the IBC, which stayed various actions, including the institution of suits, transfer of assets, and recovery of property by the Corporate Debtor. The moratorium aimed to protect the interests of all stakeholders during the insolvency resolution process. Additionally, the Tribunal confirmed the appointment of an Interim Resolution Professional (IRP) to oversee the resolution process, directing the IRP to fulfill statutory obligations under specific sections of the Code.

Issue 5:
Although the Operational Creditor initially left the appointment of the IRP to the Adjudicating Authority, they later proposed a specific individual as the IRP, whose consent and eligibility were duly submitted. The Tribunal approved the appointment of the proposed IRP, emphasizing that while the Operational Creditor's discretion to propose the IRP was exercised at a later stage, it was within their rights to do so. The appointed IRP was instructed to undertake necessary actions as mandated by relevant sections of the IBC, with a deadline set for filing the required report.