2019 (6) TMI 132 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - Operational debt within the meaning of Section 5, sub-section (21) of the Code - existence of Debt or not - Service of notice on Corporate debtor - HELD THAT - The respondent is having knowledge of pendency of the case as the respondent has made part payment during pendency of the application as also refused to accept the notice sent by the applicant. That, despite repeated efforts by the applicant the respondent has neither come forward for settlement nor appeared before the Bench. That, the records available shows that the amount due to the Applicant from the Respondent is in respect of supply of goods. Therefore, the amount claimed by the Applicant from the Respondent is operational debt within the meaning of Section 5, sub-section (21) of the Code. The operational debt is due to the Applicant. Therefore, Applicant is an Operational Creditor within the meaning of sub-section (5) of Section 20 of the Code. From the aforesaid material on record, petitioner is able to establish that there exists debt as well as occurrence of default. Petition admitted - moratorium declared.

Summary

Issues:
1. Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Determination of operational debt owed by the respondent.
3. Appointment of an Interim Insolvency Resolution Professional.
4. Declaration of moratorium and initiation of the Insolvency Resolution Process.

Analysis:
1. The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the operational creditor against the respondent, seeking recovery of dues amounting to ?20,50,609. The applicant had established the existence of debt and default, fulfilling the criteria under the Code for initiating insolvency proceedings.

2. The respondent, a company engaged in the business of supply of chemicals, failed to settle the outstanding amount despite repeated demands and notice. The Tribunal found that the amount claimed by the applicant constituted operational debt as defined in Section 5(21) of the Code. The applicant was deemed an Operational Creditor under Section 20(5) of the Code, as the debt was due and default had occurred.

3. An Interim Insolvency Resolution Professional was appointed by the Tribunal, following a declaration that no disciplinary proceedings were pending against the proposed professional. The appointed professional was tasked with initiating the corporate insolvency resolution process, including making public announcements and calling for submission of claims as per the Code's provisions.

4. Subsequently, the Tribunal declared a moratorium, prohibiting various actions against the corporate debtor, such as instituting suits, transferring assets, enforcing security interests, and recovering property. The moratorium also ensured the continuity of essential services to the corporate debtor during the resolution process, with exceptions as notified by the Central Government in consultation with financial regulators.

5. The Tribunal directed the moratorium to be effective from the date of receipt of the order until the completion of the insolvency resolution process or approval of a resolution plan, or in the case of liquidation. The petition was disposed of with no order as to costs, and communication of the order was mandated to relevant parties involved in the proceedings, including the Interim Insolvency Resolution Professional.