2017 (7) TMI 781 - Tri - Insolvency and Bankruptcy

Initiating Corporate Insolvency Resolution Process - Insolvency and Bankruptcy Code, 2016 - Held that - There is no dispute sufficiently raised with regard to quality of service. All that could be made out from the perusal of the emails is that some dispute with regard to Dehradun hoarding/advertisement bills have been raised. After the date of the email transactions between the parties continued. There was no cessation of relationship. We are not impressed with the argument that there is an actual dispute and the quality or quantity of service were seriously doubted in such a manner that it may constitute a basis for defeating the initiation of Corporate Insolvency Resolution Process. It is well settled that one swallow does not a summer make. In other words, a small lapse will not be sufficient to decline the relief of initiation of Corporate Insolvency Resolution Process as claimed in the application. Accordingly, we reject the defence as moonshine particularly when Corporate Debtor has chosen to maintain silence to the statutory notice of demand issued by the Operational Creditor. This petition is admitted and the matter be referred to Insolvency and Bankruptcy Board of India for appointment of Corporate Insolvency Resolution Professional and other procedures need to be followed. A moratorium would come in operation from today prohibiting relevant acts but would not affect the supply of essential goods or services to the Corporate Debtor and the same may be specified by the Insolvency Professional. It shall also not apply to transactions which might have been notified by the Central Government in consultation with any financial sector regulator.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP).
2. Existence of debt and default.
3. Quality of services provided by the Operational Creditor.
4. Validity of the demand notice and response from the Corporate Debtor.
5. Appointment of Insolvency Resolution Professional.
6. Issuance of moratorium.

Issue-Wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Operational Creditor, M/s. Portrait Advertising & Marketing Private Limited, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor, M/s. Mothers Pride Dairy India Private Limited.

2. Existence of debt and default:
The Operational Creditor provided marketing and advertising services to the Corporate Debtor under a contract dated 14.04.2016. Invoices totaling ?64,49,530/- were raised for these services. Despite multiple payments made by the Corporate Debtor, a significant outstanding amount remained. The Operational Creditor claimed that it had also engaged third parties to fulfill its contractual obligations, and these third parties had sent demand notices to the Operational Creditor.

3. Quality of services provided by the Operational Creditor:
The Corporate Debtor contended that the Operational Creditor had suppressed vital facts and raised issues regarding the quality of services. Emails dated 06.09.2016 and 04.07.2016 were cited to highlight complaints about the quality of wall painting advertisements and hoardings. The Corporate Debtor argued that these issues were communicated to the Operational Creditor, and there was no admission of any amount due.

4. Validity of the demand notice and response from the Corporate Debtor:
The Operational Creditor sent a demand notice on 20.03.2017 under the provisions of the Code, which went unanswered by the Corporate Debtor even after the expiry of 20 days. The Tribunal noted that the Corporate Debtor's silence to the statutory notice of demand was significant and rejected the defense of service quality issues as "moonshine."

5. Appointment of Insolvency Resolution Professional:
The Tribunal directed the matter to be referred to the Insolvency and Bankruptcy Board of India for the appointment of a Corporate Insolvency Resolution Professional. This professional is tasked with making a public announcement concerning the initiation of the CIRP and performing duties as per Sections 15, 17, 18, 20, and 21 of the Code.

6. Issuance of moratorium:
A moratorium was declared effective immediately, prohibiting:
- The institution or continuation of suits or proceedings against the Corporate Debtor.
- The transfer, encumbrance, alienation, or disposal of any assets or legal rights of the Corporate Debtor.
- Actions to foreclose, recover, or enforce any security interest created by the Corporate Debtor.
- Recovery of any property by an owner or lessor in possession of the Corporate Debtor.
The moratorium does not affect the supply of essential goods or services to the Corporate Debtor or transactions notified by the Central Government.

Conclusion:
The petition was admitted, and the Tribunal issued directions for the appointment of a Corporate Insolvency Resolution Professional and the imposition of a moratorium. The personnel connected with the Corporate Debtor were mandated to cooperate with the Interim Resolution Professional. The petition was disposed of in these terms.

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