2017 (7) TMI 265 - Tri - Insolvency and Bankruptcy

Application under Section 8 and 9 of the Insolvency and Bankruptcy Code, 2016 - default in making the payment of operational debt - Held that - The Application is admitted. We declare a moratorium in terms of Section 13 of the Code for the interim resolution professional to follow various provision and comply with each one of those. Section 14 of the Code shall also come in operation. The Interim Resolution Professional shall take all steps in terms of Section 13 (2), Section 14 & 15 of the Code. As no insolvency resolution professional has been named by the Applicant we request the Insolvency and Bankruptcy Board of India (IBBI) to appoint one. Let a reference be made to the Insolvency and Bankruptcy Board of India to furnish the name of a resolution professional within a period of ten days in accordance with Section 16(4) who shall, thereafter, perform all functions and duties as per the provisions of Sections 13,14,15,17,18 of the Code so on and so forth. All the personnel of the Corporate Debtor, its promoter or any other person associated with the management of the Corporate Debtor are duty bound to extend all assistance and co-operation to Interim Resolution Professional as may be required for managing the affairs of the Corporate Debtor. In case such co-operation is not rendered, then the interim resolution professional shall be entitled to file application before this Tribunal as per the terms of Section 19(2) of the Code.

Issues Involved:

1. Default in Payment of Operational Debt
2. Maintainability of Application under Section 8 and 9 of the Insolvency and Bankruptcy Code, 2016
3. Legal Assignment of Debt
4. Existence of Dispute and Arbitration Proceedings
5. Application of English Law
6. Insurance Coverage of Transaction
7. Errors in Application Details

Issue-wise Detailed Analysis:

1. Default in Payment of Operational Debt:
The Corporate Debtor, Shilpi Cable Technologies Limited, defaulted in making payment of operational debt amounting to US Dollar 3,010,150.00 (equivalent to ?19,55,39,344.00/-) to the Applicant, Macquarie Bank Limited, which was an assignee of the Supplier, S.V. Oversees Private Limited. The debt originated from a transaction involving the supply of Copper Rods, with the payment terms agreed upon in a contract dated 18.01.2016. The Corporate Debtor acknowledged the outstanding amount and requested more time to settle the accounts due to financial hardship.

2. Maintainability of Application under Section 8 and 9 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal found that the application met the requirements of Sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016. The Applicant issued a demand notice, and the Corporate Debtor acknowledged the debt without disclosing any pending suit or arbitration proceedings before the receipt of the demand notice. The application was filed in the jurisdictional bench at New Delhi, fulfilling Section 60 of the Code.

3. Legal Assignment of Debt:
The Corporate Debtor argued that the Applicant was not an Operational Creditor as it neither supplied goods nor rendered services. However, the Tribunal held that under Section 5(20) of the Code, an Operational Creditor includes any person to whom such debt has been legally assigned or transferred. The assignment to the Applicant was lawful, and the Corporate Debtor's lack of acknowledgment did not affect the validity of the assignment.

4. Existence of Dispute and Arbitration Proceedings:
The Corporate Debtor claimed that arbitration proceedings had been initiated against the Supplier, arguing that this constituted a dispute. However, the Tribunal noted that the arbitration notice was issued on 19.04.2017, after the demand notice dated 08.03.2017 and the reply dated 20.03.2017. According to Section 8(2)(a) of the Code, the dispute must exist before the receipt of the demand notice. Therefore, the Tribunal rejected this objection, finding no valid dispute before the demand notice.

5. Application of English Law:
The Corporate Debtor argued that the agreement was governed by English law, which should bar the initiation of insolvency proceedings under Indian law. The Tribunal dismissed this argument, stating that the Corporate Debtor failed to demonstrate how English law provided a different remedy than the Insolvency and Bankruptcy Code.

6. Insurance Coverage of Transaction:
The Corporate Debtor contended that the transaction was insured and that the insurance company was responsible for the payment. The Tribunal rejected this argument, emphasizing that the Operational Creditor had no privity of contract with the insurance company, and the matter was between the Corporate Debtor and the insurance company.

7. Errors in Application Details:
The Corporate Debtor pointed out an error in the application, where the name and address of the Power of Attorney holder were incorrectly filled in. The Tribunal deemed this a minor error, condonable and not sufficient to dismiss the application.

Conclusion:
The Tribunal admitted the application, declared a moratorium under Section 13 of the Code, and directed the Insolvency and Bankruptcy Board of India (IBBI) to appoint an interim resolution professional. The Corporate Debtor and its personnel were instructed to cooperate with the interim resolution professional. The application was disposed of in these terms.

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