2018 (3) TMI 320 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - existence of operational debt - failure to make payment against procurement of paddy - Held that - As per the invoices issued by the Operational Creditor with regard to supply of paddy to the Operational Debtor it is proved beyond doubt that goods in terms of Section 5(21) of the Code were procured by the Operational Debtor from the Operational Creditor on various occasions. It is patent from a perusal of the VAT D-2 form (from pg. 216-220) issued by the Respondent Company that it acknowledges the receipts of 1203 quintals of paddy from the petitioner firm. For determination of the aforesaid issue it would be necessary to read the definition of the expression Operational Debt given in Section 5(21) of the Code The definition of operational debt postulates that it is a claim, inter alia, in respect of the provision of goods or services including employment etc. A perusal of the invoices issued by the Operational Creditor in the name of Operational Debtor clearly shows that Operational Creditor has supplied paddy to the Operational Debtor on various occasions. Therefore, the debt which is due and payable by the Operational Debtor to the Operational Creditor is prima facie covered by Section 5(21). It is also evident that Operational Debtor has committed default and the amount of ₹ 32,55,653/- has remained unpaid. Thus, there is default committed on the part of the Operational Debtor within the meaning of Section 3(12) read with Section 4 and Section 9(1) of the Code, 2016. As a sequel to the above discussion, this petition is admitted. In pursuance of Section 13(2) of Code, we direct that Interim Insolvency Resolution Professional shall immediately make public announcement with regard to admission of this application under Section 7 of the Code.

Summary

Issues:
- Application under Section 9 of the Insolvency and Bankruptcy Code, 2016
- Determination of operational debt and default committed by the Operational Debtor
- Appointment of an Interim Resolution Professional
- Declaration of moratorium and its implications
- Direction for public announcement and communication of the order

Analysis:
1. The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, by an Operational Creditor against an Operational Debtor. The Operational Creditor claimed that the Operational Debtor owed a significant amount for the supply of paddy, leading to accumulation of unpaid amounts over time.

2. The Operational Creditor provided detailed evidence, including invoices, stock transfer challans, and TDS certificates, to support the claim of outstanding dues against the Operational Debtor. Despite repeated requests and legal notices, the Operational Debtor failed to make the payments, resulting in a total operational debt of ?32,55,653 as of March 2017.

3. The Tribunal examined the definition of operational debt under Section 5(21) of the Code, which includes claims related to the provision of goods or services. The invoices and supporting documents confirmed that the Operational Creditor had supplied paddy to the Operational Debtor, establishing the existence of operational debt as per the statutory definition.

4. It was established that the Operational Debtor had defaulted on the payment, indicating a violation of Section 3(12) read with Section 4 and Section 9(1) of the Code. Consequently, the Tribunal admitted the petition and directed the appointment of an Interim Resolution Professional to oversee the Corporate Insolvency Resolution Process.

5. Following the recommendation by the Insolvency and Bankruptcy Board of India, the Tribunal appointed an Interim Resolution Professional to manage the resolution process efficiently, ensuring compliance with the statutory timelines and procedures. The Tribunal also declared a moratorium under Section 14 of the Code, imposing restrictions on legal actions against the Corporate Debtor.

6. The Tribunal emphasized the importance of cooperation from all parties involved, directing the Interim Resolution Professional to safeguard the assets of the Operational Debtor and adhere to the provisions of the Code diligently. Additionally, the Operational Creditor was instructed to provide funds to cover the expenses of the Interim Resolution Professional.

7. To ensure transparency and compliance, the Tribunal directed the Interim Resolution Professional to communicate the order to all relevant parties promptly. The decision highlighted the procedural requirements and obligations of the parties involved in the insolvency resolution process, aiming to facilitate a fair and effective resolution of the operational debt dispute.