2021 (3) TMI 584 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Operational Creditor - existence of debt and dispute or not - HELD THAT - It appears from the records that the claim of Operational Creditor has never been disputed by the Corporate Debtor within the timelines as mentioned in the Code nor the Corporate Debtor could show a pre-existing dispute in this matter - The applicant has qualified to become an Operational Creditor as the Corporate Debtor owed them debt which is considered as an Operational Debt . As the applicant has undoubtedly provided services to the Corporate Debtor, their dues are qualified to classify as Operational Debt . Default - HELD THAT - The Corporate Debtor admits their debt and states that due to Covid 19 pandemic the construction works have come to a standstill, therefore the Corporate Debtor was not in a position to procure funds. Dispute - HELD THAT - The Corporate Debtor could not establish any of the three points mentioned under the definition in the Code, i.e., the existence of the amount of debt, the quality of goods or service, or the breach of a representation or warranty. It is clear that the existence of dispute must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice. If it comes to the notice of the Adjudicating Authority that the operational debt is exceeding ₹ 1 lakh prior to the notification of 24th March 2020 and that the aforesaid debt is due and payable and has not been paid, in such a case, in the absence of any existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before receipt of the demand notice of the unpaid operational debt , the application under Section 9 cannot be rejected and is required to be admitted. Since all the aforesaid conditions are fulfilled in the instant case, this Tribunal is of the opinion that the application submitted by Operational Creditor is complete in all respects - Application admitted - moratorium declared.

Issues Involved:
1. Existence of Operational Debt
2. Default in Payment
3. Pre-existing Dispute
4. Maintainability of Application under IBC
5. Appointment of Interim Resolution Professional (IRP)
6. Moratorium and its Implications

Issue-wise Detailed Analysis:

1. Existence of Operational Debt:
The Operational Creditor, M/s. Kollinal Steels and Alloys Pvt. Ltd., supplied various steel items to the Corporate Debtor, M/s. Manhaar Constructions India Private Limited, amounting to ?45,37,944/- between 13.08.2019 and 17.09.2019. The Corporate Debtor paid ?12,97,350/-, leaving a balance of ?32,40,594/- as on 17.11.2019. The Tribunal confirmed that the applicant qualifies as an "Operational Creditor" under Section 5(20) of the IBC, and the dues qualify as "Operational Debt" under Section 5(21).

2. Default in Payment:
The Corporate Debtor admitted the debt but attributed non-payment to the Covid-19 pandemic, which halted construction activities, making it difficult to procure funds. The Tribunal noted that the Corporate Debtor did not dispute the debt within the timelines specified in the Code, thereby establishing "Default" as defined under Section 3(12) of the IBC.

3. Pre-existing Dispute:
The Corporate Debtor failed to establish any pre-existing dispute regarding the debt, quality of goods, or breach of representation or warranty as per Section 5(6) of the IBC. The Tribunal referenced the Supreme Court's decision in "Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited," which mandates that the existence of a dispute must be pre-existing before the receipt of the demand notice. The Tribunal found no evidence of such a dispute.

4. Maintainability of Application under IBC:
The Corporate Debtor argued that the pendency of a civil suit and criminal complaints under Section 138 of the NI Act, 1881, should render the application non-maintainable. However, the Tribunal cited precedents from "International Asset Reconstruction Company Pvt. Ltd. V. Paramount Mills Private Limited" and "Shah Brothers Ispat Pvt. Ltd. V. P. Mohanraj & Ors," clarifying that the pendency of such cases does not affect the maintainability of an application under the IBC.

5. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. P.D Vincent as the Interim Resolution Professional (IRP), based on the Operational Creditor's suggestion and his declaration confirming no pending disciplinary proceedings. The IRP's responsibilities include those outlined in Sections 15, 17, 18, 19, 20, and 21 of the IBC.

6. Moratorium and its Implications:
Upon admitting the application, the Tribunal imposed a moratorium as per Section 14 of the IBC, prohibiting:
- Institution or continuation of suits or proceedings against the Corporate Debtor.
- Execution of judgments, decrees, or orders.
- Actions to foreclose, recover, or enforce security interests.
- Recovery of properties occupied by the Corporate Debtor.
The moratorium ensures the continuation of essential goods or services to the Corporate Debtor and remains effective until the completion of the Corporate Insolvency Resolution Process (CIRP) or approval of a resolution plan.

Order:
The Tribunal admitted the application under Section 9 of the IBC, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Operational Creditor was directed to deposit ?2,00,000/- with the IRP for initiating the proceedings. The Registry was instructed to communicate the order to all relevant parties and the Registrar of Companies (RoC) for necessary modifications. The application IBA/26/KOB/2020 was admitted, and IA(IBC)17/KOB/2021 was disposed of.

Dated:
9th March 2021

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