2019 (9) TMI 676 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of Corporate Insolvency Resolution Process - Section 9 of the Insolvency and Bankruptcy Code, 2016, read with Rule 6 of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Operational Debt - default in repayment of debt due and not payable - existence of dispute. HELD THAT - This adjudicating authority is of the considered view that operational debt is due to the Applicant. That, service is complete and no dispute has been raised by the respondent. That, 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 - the Application filed by the Applicant is complete in all respects. It is a fit case to initiate Insolvency Resolution Process by admitting the Application under Section 9(5)(1) of the Code - Petition admitted - moratorium declared.

Issues involved:
Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for triggering Insolvency Resolution Process against a corporate debtor.

Detailed Analysis:

1. Operational Debt Claim:
The applicant, an operational creditor, sought to initiate insolvency proceedings against the respondent, a corporate debtor, for unpaid financial services. The applicant provided services as per the appointment letter, invoiced for ?4,00,000, but received only ?1,50,000 with the balance remaining unpaid. The respondent acknowledged the debt but failed to pay the outstanding amount despite reminders and demand notices. The debt was undisputed, admitted by the respondent, and fell due within the limitation period.

2. Submission of Relevant Documents:
The operational creditor submitted various documents supporting the claim, including bank statements, appointment letter, demand notice, invoices, ledger account, reminder letters, and consent of the proposed insolvency resolution professional. These documents substantiated the claim for unpaid operational debt.

3. Respondent's Admission of Debt:
The respondent admitted the debts of the petitioner in their reply and disclosed that their account was classified as Non-Performing Asset (NPA) by the bank, hindering their ability to pay the operational creditor. The respondent did not dispute the claim raised by the operational creditor.

4. Judicial Examination:
The adjudicating authority examined the application under Section 9 of the Insolvency and Bankruptcy Code, focusing on the existence of operational debt exceeding ?1.00 lac, documentary evidence confirming the debt, and absence of dispute between the parties. The authority referenced the legislative guide on insolvency law to ensure compliance with legal provisions.

5. Appointment of Interim Resolution Professional:
The operational creditor initially proposed a name for the interim resolution professional, which was later changed to appoint Mr. Parag Sheth. The adjudicating authority appointed Mr. Sheth as the interim resolution professional under Section 13(1)(c) of the Code to oversee the insolvency resolution process.

6. Declaration of Moratorium:
Following the admission of the application, the adjudicating authority declared a moratorium prohibiting legal actions against the corporate debtor, asset transfers, enforcement of security interests, and recovery of property. The moratorium aimed to facilitate the corporate insolvency resolution process and protect the interests of all stakeholders involved.

7. Effect of Moratorium:
During the moratorium period, the supply of goods and essential services to the corporate debtor was to continue without interruption, ensuring the continuity of operations. The order of moratorium would remain in effect until the completion of the insolvency resolution process or until a resolution plan was approved or liquidation was ordered.

8. Disposal of Petition:
The petition was admitted, and the order of moratorium was issued without costs. The communication of the order was directed to the relevant parties, including the applicant, financial creditor, corporate debtor, and the appointed interim insolvency resolution professional, to ensure compliance and implementation of the decision.

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