2018 (1) TMI 442 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - Held that - In view of the fact that despite service of notice and thus an opportunity having been given to the Corporate Debtor to defend its cause by way of compliance with the principles of natural justice mandated to be adhered to by this Tribunal, the Corporate Debtor has not availed the opportunity given and from the facts averred and the documents placed before this Tribunal, this Tribunal is of the considered view that this is a fit case for admitting the application as filed by an Operational Creditor for initiation of Corporate Insolvency Resolution Process, as contemplated under the provisions of IBC, 2016. Since the Operational Creditor has failed to name an Interim Resolution Professional (IRP) in Part 3 of the Application as filed before this Tribunal, in terms of the provisions of Section 16 of IBC, 2016 this Tribunal makes a reference to the Insolvency and Bankruptcy Board of India (IBBI) for recommendation of the name of an IRP subject to the condition that no disciplinary proceedings are pending against such an IRP named who may act as an IRP in relation to the CIRP of the Corporate Debtor. Application/Petition stands admitted in terms of Section 9(5) of IBC, 2016 and the moratorium shall come in to effect as of this date. A copy of the order shall be communicated to the Operational Creditor as well as to the Corporate Debtor above named by the Registry

Summary

Issues:
Petition filed under Sections 8 and 9 of Insolvency and Bankruptcy Code, 2016 seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor based on unpaid operational debt.

Analysis:
The Operational Creditor filed a petition under Sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to an unpaid sum of ?10,78,372 for goods supplied. The Operational Creditor alleged that the Corporate Debtor failed to make payments for supplies made from 31.05.2016 to 06.08.2016, which were essential for manufacturing skin care products. A demand notice was sent to the Corporate Debtor on 19.06.2017, as per the provisions of the IBC, 2016, and was duly delivered. The Operational Creditor also submitted a certificate from bankers confirming the unpaid debt and financial statements indicating losses incurred by the Corporate Debtor.

The Tribunal directed the Operational Creditor to provide proof of service of the notice of default and the application to the Corporate Debtor. The consignment for the notice of default was delivered on 23.6.2017, and the application copy was delivered on 31.8.2017. Despite receiving the notices, the Corporate Debtor did not appear before the Tribunal. The Operational Creditor presented various documents, including the Certificate of Incorporation, financial statements, sales invoices, and an account statement, to establish the debt and the Corporate Debtor's failure to pay.

The Tribunal found that the Operational Creditor met the criteria of an Operational Creditor as defined in the IBC, 2016, and that the debt in default was an operational debt arising from a commercial transaction. Considering the absence of the Corporate Debtor's defense and the evidence presented, the Tribunal admitted the application for initiating CIRP. The Tribunal referred the case to the Insolvency and Bankruptcy Board of India (IBBI) for the appointment of an Interim Resolution Professional (IRP) and imposed a moratorium as per Section 14 of the IBC, 2016, on the Corporate Debtor's assets and legal proceedings.

The moratorium period specified under the IBC, 2016, prohibits certain actions against the Corporate Debtor's assets. Essential goods or services supply cannot be terminated during this period. The moratorium will remain in effect until the completion of the corporate insolvency resolution process. The Tribunal communicated the order to the Operational Creditor, Corporate Debtor, and IBBI for further actions in appointing an IRP and managing the CIRP.