2017 (8) TMI 492 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Insolvency and Bankruptcy Code, 2016 - Held that - Operational Creditor did not comply with sub-section (4) of section 9 of the Code, the Petition cannot be rejected. This Adjudicating Authority shall follow the procedure laid down under sub-section (3) of Section 16 of the Code, and the Insolvency and Bankruptcy Board of India shall follow sub-section (4) of Section 16 of the Code. This Adjudicating Authority, by this order passed under sub-section (5) of Section 9 of the Code, is admitting this Petition. This Adjudicating Authority is also of the view that it is necessary to make a Reference to the Insolvency and Bankruptcy Board of India established under the Code to recommend the name of an Insolvency Professional, against whom no disciplinary proceedings are pending, to this Adjudicating Authority, within ten (10) days from the date of receipt of the Reference. No record of dispute is made available to this Adjudicating Authority. The Applicant has placed on record the Ledger Account of Applicant in the account books of Corporate Debtor. Section 13 of the Code enjoins upon the Adjudicating Authority to exercise its discretion to pass an order to declare a moratorium for the purposes referred to in section 14, to cause a public announcement of the initiation of corporate insolvency resolution and call for submission of claims as provided under section 15 of the Code. Sub-section (2) of section 13 says that public announcement shall be made immediately after the appointment of Interim Resolution Professional. In the case on hand, simultaneous with the admission order, this Adjudicating Authority is not going to appoint Interim Resolution Professional because the Applicant did not propose the name of Interim Resolution Professional. But, this Adjudicating Authority will appoint Interim Resolution Professional after the same is recommended by the Insolvency and Bankruptcy Board of India under section 16(4) of the Code. (a) In view of the above discussion, the Petition is admitted. (b) This Adjudicating Authority hereby order reference to Insolvency and Bankruptcy Board of India to recommend the name of Insolvency Professional against whom no disciplinary proceedings are pending to this Authority within 10 (Ten) days from the date of receipt of reference. (c) This Adjudicating Authority hereby declares moratorium under section 13(l)(a) prohibiting the following as laid down in section 14 of the Code; (i) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (ii) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (iii) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (iv) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. (d) However, the supply of goods and essential services to the corporate debtor shall not be terminated or suspended or interrupted during moratorium period. The moratorium order in respect of (i), (ii), (iii) and (iv) above shall not apply to the transactions notified by the Central Government. This order of moratorium shall be in force from the date of order till the completion of Corporate Insolvency Resolution Process subject to the Proviso under sub-section (4) of section 14. This Adjudicating Authority shall give separate order for public announcement at the time of appointment of an Interim Resolution Professional after the proposal is received from the Insolvency and Bankruptcy Board of India.

Issues Involved:
1. Whether the claim is an operational debt.
2. Whether the Applicant qualifies as an Operational Creditor.
3. Whether M/s. Stratus Foods Private Limited is a Corporate Debtor.
4. Compliance with the requirements of sub-sections (1) to (4) of section 9 of the Insolvency and Bankruptcy Code, 2016 read with Rules 5 and 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

Issue-wise Detailed Analysis:

1. Whether the claim is an operational debt:
The Tribunal examined the definition of "Operational Debt" under sub-section (21) of Section 5 of the Insolvency and Bankruptcy Code, 2016, which includes claims in respect of the provision of goods or services. The facts disclosed that the Applicant supplied goods to the Corporate Debtor, thus categorizing the claim as an 'operational debt'.

2. Whether the Applicant qualifies as an Operational Creditor:
According to sub-section (20) of Section 5 of the Code, an "Operational Creditor" is a person to whom an operational debt is owed. Since the amount due to the Applicant is an operational debt, the Applicant is considered an 'operational creditor'.

3. Whether M/s. Stratus Foods Private Limited is a Corporate Debtor:
The Tribunal referred to sub-section (8) of Section 3 of the Code, which defines a "Corporate Debtor" as a corporate person who owes a debt to any person. M/s. Stratus Foods Private Limited, being a registered company under the Companies Act, qualifies as a corporate person and owes a debt to the Applicant. Hence, it is a Corporate Debtor.

4. Compliance with the requirements of sub-sections (1) to (4) of section 9 of the Code read with Rules 5 and 6 of the Rules, 2016:
- Sub-section (1) of Section 9: The Corporate Debtor failed to make payment or issue a notice of dispute within ten days from the date of receipt of the demand notice, as required under sub-section (2) of Section 8 of the Code.
- Sub-section (2) and (3) of Section 9: The Applicant paid the required fee and enclosed the necessary documents with the application.
- Sub-section (4) of Section 9: The Applicant did not propose a Resolution Professional to act as an Interim Resolution Professional. However, the Tribunal noted that the petition cannot be rejected on this ground alone. Instead, the Tribunal will make a reference to the Insolvency and Bankruptcy Board of India to recommend an insolvency professional.

Conclusion:
The Tribunal admitted the petition under sub-section (5) of Section 9 of the Code. It ordered a reference to the Insolvency and Bankruptcy Board of India for the recommendation of an Insolvency Professional. Additionally, a moratorium under Section 13(1)(a) of the Code was declared, prohibiting various actions against the Corporate Debtor, such as the institution or continuation of suits, transferring or disposing of assets, and recovery of property. The supply of essential goods and services to the Corporate Debtor shall not be interrupted during the moratorium period. The moratorium will remain in force until the completion of the Corporate Insolvency Resolution Process. The Tribunal will issue a separate order for a public announcement upon appointment of an Interim Resolution Professional. The matter is listed for further proceedings after receiving the proposal from the Insolvency and Bankruptcy Board of India.

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