2020 (1) TMI 714 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - operational debt - debt due and payable and has not yet been paid or not - existence of a dispute between the parties - pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such 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 - That, 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.

Summary

Issues:
Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 for operational debt exceeding ?1.00 lac.

Analysis:
The petitioner, an operational creditor engaged in the manufacture of paper products, filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the respondent, a corporate debtor, for non-payment of operational debt. The operational creditor supplied chemicals to the corporate debtor for the manufacture of paper products as per their arrangement. Despite the delivery of products and issuance of invoices, the corporate debtor failed to make the payment within the credit period, leading the operational creditor to issue a demand notice under section 8 of the IB Code. The total outstanding debt as of September 26, 2019, was ?4,79,174. The respondent made a partial payment of ?50,000, which pertained to prior invoices. The petitioner submitted various documents to support the claim, including purchase orders, invoices, consignment notes, ledger, demand notice, and affidavits.

Upon examination, it was found that the respondent did not raise any dispute regarding the operational debt. The adjudicating authority had to proceed with the matter in the absence of the respondent since no appearance or reply was made. The authority had to determine the existence of operational debt exceeding ?1.00 lac, the due and payable status of the debt, and the absence of a dispute between the parties. The legislative guide on Insolvency Law of United Nations Commission on International Trade Law was referenced to ascertain the legitimacy of the debt and the absence of a dispute or set off.

Based on the facts and circumstances presented, the adjudicating authority concluded that the operational debt was due to the applicant, who qualified as an Operational Creditor under the Code. The authority appointed an interim resolution professional and declared a moratorium to initiate the insolvency resolution process. The moratorium prohibited various actions against the corporate debtor, including suits, asset transfers, recovery of property, and termination of essential services. The order of moratorium was to remain in effect until the completion of the corporate insolvency resolution process or until further orders were issued. The petition was admitted, and the communication of the order was directed to the involved parties and the interim insolvency resolution professional.