2018 (2) TMI 445 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - existence of eligible debt - Operational Creditor had provided security services to the Corporate Debtor and maintained a running account in respect of the said transaction - Held that - This Bench is satisfied that the Corporate Debtor defaulted in making payment of the outstanding debt claimed by the Operational Creditor. The Operational Creditor has fulfilled all the requirements of law. Therefore, CP/667/(IB)/CB/2017 is admitted and the commencement of the Corporate Insolvency Resolution Process is ordered, which ordinarily shall get completed within 180 days, reckoning from the day this order is passed. The moratorium is hereby declared which shall have effect from the date of this Order till the completion of Corporate Insolvency Resolution Process, for the purposes referred to in Section 14 of the I&B Code, 2016.

Summary

Issues: Admitting application under Section 9 of the Insolvency & Bankruptcy Code, 2016; Declaration of moratorium; Appointment of Interim Resolution Professional (IRP); Default in payment by Corporate Debtor; Compliance with requirements of law by Operational Creditor.

Admitting Application under Section 9: The Tribunal considered an application filed by the Operational Creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor. The Operational Creditor had served notice on the Corporate Debtor as per the Tribunal's direction, and the service was deemed sufficient. The Tribunal found evidence of liability on the part of the Corporate Debtor for security services provided by the Operational Creditor. The outstanding amount claimed was specified along with interest, and a Demand Notice under Section 8 of the I&B Code was issued by the Corporate Debtor but remained unanswered. The Operational Creditor submitted an Affidavit confirming the absence of any dispute regarding the debts owed by the Corporate Debtor. The Tribunal, after reviewing the documents and arguments, concluded that the Corporate Debtor had defaulted in payment, and all legal requirements were met, leading to the admission of the application and commencement of the Corporate Insolvency Resolution Process.

Declaration of Moratorium: The Tribunal declared a moratorium effective from the date of the order until the completion of the Corporate Insolvency Resolution Process, in accordance with Section 14 of the I&B Code, 2016. The moratorium prohibited various actions against the Corporate Debtor, including the institution or continuation of suits, transferring or disposing of assets, enforcing security interests, or recovering property. Essential goods or services supply to the Corporate Debtor was protected from termination during the moratorium period, subject to government notifications. These measures aimed to facilitate the resolution process and protect the interests of all stakeholders involved.

Appointment of Interim Resolution Professional (IRP): The Tribunal directed the Registry to refer the matter to the Insolvency and Bankruptcy Board of India (IBBI) for recommending the name of the IRP since the Operational Creditor did not propose a candidate. The Registry was instructed to follow up on the recommendation and present the chosen IRP for appointment by the Tribunal. This step ensures the proper administration of the insolvency resolution process and the protection of the Corporate Debtor's assets and interests.

Conclusion: The Tribunal's detailed analysis and decision in this judgment underscore the procedural and substantive aspects of insolvency proceedings under the I&B Code, 2016. By admitting the application, declaring a moratorium, and initiating the resolution process, the Tribunal aimed to address the default in payment, uphold legal requirements, and safeguard the interests of both the Operational Creditor and the Corporate Debtor. The appointment of an IRP through the prescribed procedure further enhances the transparency and effectiveness of the insolvency resolution framework, ensuring a fair and orderly resolution of financial distress situations.