2020 (10) TMI 480 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - dispute not raised within required time period after receipt of demand notice - HELD THAT - Corporate-debtor after the receipt of the demand notice is required to raise the dispute within ten days from the receipt of demand notice or show the documents that the payment of the unpaid operational-debt has already been made. And if the corporate-debtor fails to raise the 'existence of disputes and documents showing the payment of operational-debt then the operational-creditor has right to file an application under Section 9 of the Insolvency and Bankruptcy, Code, 2016. In this case no reply to the demand notice was sent by the corporate-debtor. Therefore, corporate-debtor has failed to raise any 'existence of disputes' and show that the operational-debt raised by the operational-creditor has already been paid. So under such circumstances, there are no option, but to pass the order under Section 9(5) (i) if the application is complete and from the perusal of the application, we find that the application is complete and there is no payment of unpaid operational-debt and no notice of dispute has been raised by the operational-creditor or there is no record of dispute in the information utility and the operational-creditor has also proposed the name of the IRP against whom there is no disciplinary proceedings pending and the defaulted amount is more than one lac. So, considering these facts, we have no option to admit the application. Application admitted - moratorium declared.

Summary

Issues Involved:
Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code based on non-payment by the corporate debtor despite demand notice.

Analysis:
The operational-creditor filed an application under Section 9 of the Insolvency and Bankruptcy Code seeking to initiate the CIRP against the corporate-debtor due to unpaid dues. The operational-creditor, engaged in manufacturing structural metal products, had received orders from the corporate-debtor for supply of goods. Despite delivering the ordered goods and sending a demand notice with invoices, the corporate-debtor neither made the payment nor raised any dispute. The respondent's counsel withdrew representation, and despite multiple opportunities given, no response was received from the respondent.

The applicant, through its counsel, submitted that the demand notice was duly delivered, and no reply was received from the corporate-debtor. The application included details of the outstanding dues, the delivery of the demand notice, and the absence of any response from the respondent. The applicant also proposed the name of the Interim Resolution Professional (IRP) in the application.

Upon examining the provisions of Sections 8 and 9 of the Insolvency and Bankruptcy Code, it was noted that the corporate-debtor must raise any dispute within ten days of receiving the demand notice or provide documents showing payment of the debt. As the corporate-debtor failed to respond or show payment, the operational-creditor was deemed eligible to file the application under Section 9. The Bench found the application complete, with no payment made, no dispute raised, and the proposed IRP having no pending disciplinary proceedings, leading to the admission of the application to initiate CIRP.

A moratorium was imposed as per Section 14 of the Code, preventing legal actions against the corporate debtor and asset transfers. The IRP proposed by the applicant was confirmed, and directed to take necessary steps under the Code. The operational-creditor was instructed to deposit a fee for the IRP's expenses, to be reimbursed later. The registry was directed to communicate the order to all relevant parties involved.