2020 (1) TMI 349 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in making repayment - existence of debt and default or not - Section 9 of Insolvency and Bankruptcy Code, 2016, R/w Rule 6 of Insolvency Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 - HELD THAT - There is no dispute with regard to filing of application on behalf of the corporate debtor under section 10 of the I B Code. Admittedly, it is not the case of the corporate debtor that it had paid the agreed fee to the operational creditor. However, the corporate debtor is contending that certain obligations to be discharged in respect of agreement dated 27.03.2018. Said obligations, whatever they may be, have no connection to the obligation discharged under the agreement dated 02.05.2018. The alleged dispute, if any, in respect of agreement dated 27.03.2018 is in no way connected to the services rendered for the corporate debtor under agreement dated 02.05.2018. So, it cannot be said that there is a prior dispute. Secondly, no payment is made to the operational creditor in respect of services rendered for the corporate debtor in filing application under section 10 of the I B Code through its associate, Shri Satishkumar, Practising Company Secretary. The amount payable to the operational creditor falls under the definition of 'operational debt' as it refers to the payment for the services rendered to the corporate debtor. Secondly, demand notice was issued and there is compliance of provisions of section 9 of the I B Code. Thus, there is debt and default of operational debt. As such the petition is liable to be admitted. The Adjudicating Authority admits this Petition under Section 9 of IBC, 2016, declaring moratorium for the purposes referred to in Section 14 of the Code - petition admitted - moratorium declared.

Issues Involved:
1. Existence of Debt and Default
2. Validity and Compliance of Agreements
3. Prior Dispute and Payment Obligations
4. Admissibility of Petition under Section 9 of IBC

Detailed Analysis:

1. Existence of Debt and Default:
The Petitioner, Adroit Financial Services, claimed that the Respondent, M/S. Yadadri Life Sciences Private Limited, defaulted in paying ?12,98,000/- for professional services rendered. The Tribunal found that the operational creditor provided services under a Memorandum of Understanding (MOU) dated 02.05.2018, which included filing an application under Section 10 of the Insolvency and Bankruptcy Code (I&B Code) before the NCLT, Hyderabad. The Tribunal confirmed that the debt existed and default occurred as the corporate debtor did not pay the agreed fee for these services.

2. Validity and Compliance of Agreements:
The Tribunal examined two agreements: one dated 27.03.2018 for arranging finance and another dated 02.05.2018 for NCLT services. The corporate debtor argued that the operational creditor failed to fulfill the terms of the 27.03.2018 agreement, leading to the failure of the first One-Time Settlement (OTS) proposal with SBI. However, the Tribunal noted that the obligations under the 27.03.2018 agreement were separate and distinct from those under the 02.05.2018 agreement. The Tribunal focused on the latter, confirming that the services were rendered as per this agreement, and the corporate debtor did not dispute the filing of the Section 10 application.

3. Prior Dispute and Payment Obligations:
The corporate debtor contended that there was no debt due and claimed that the operational creditor had failed to provide the agreed services under the 27.03.2018 agreement. However, the Tribunal found no prior dispute regarding the 02.05.2018 agreement, which was the basis for the operational creditor’s claim. The Tribunal highlighted that the corporate debtor did not make any reference to the 02.05.2018 agreement in its counter, indicating no prior dispute related to this specific agreement. The Tribunal also noted that the corporate debtor had not paid the agreed fee for the services rendered under the 02.05.2018 agreement.

4. Admissibility of Petition under Section 9 of IBC:
The Tribunal concluded that the amount claimed by the operational creditor fell under the definition of 'operational debt' as it was for services rendered. The Tribunal confirmed that the demand notice was issued in compliance with Section 9 of the I&B Code. Given the existence of debt and default, and the absence of a prior dispute related to the 02.05.2018 agreement, the Tribunal admitted the petition.

Judgment:
The Tribunal admitted the petition under Section 9 of the IBC, 2016, declaring a moratorium as per Section 14 of the Code. The moratorium prohibits the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of assets, and other specified actions. The Tribunal appointed an Interim Resolution Professional to carry out the functions under the Insolvency & Bankruptcy Code. The order of moratorium is effective from 06.01.2020 until the completion of the Corporate Insolvency Resolution Process or until a resolution plan is approved or liquidation is ordered, whichever is earlier.

Conclusion:
The Tribunal found that the operational creditor provided services under a valid agreement, and the corporate debtor defaulted on payment. There was no prior dispute regarding the specific agreement under which the services were rendered. Consequently, the Tribunal admitted the petition and initiated the Corporate Insolvency Resolution Process against the corporate debtor.

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