2021 (5) TMI 253 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditor - existence of debt and dispute or not - Service of demand notice - time limitation - HELD THAT - Since the Corporate Debtor did not pay the outstanding till 14.09.2020 the Operational Creditor served on the Corporate Debtor a demand notice under Section 8 of the IB code. In-spite of receipt of such notice the Corporate Debtor neither made any payment nor replied the notice pointing any pre-existing dispute. Hence this application is filed to start the Corporate Insolvency Resolution Process of the Corporate Debtor - Notice of this application was duly served to the Corporate Debtor. One of its Directors Mr. Mukund D. Patel appeared and filed the reply. We have gone through contentions therein. It appears to us that the Corporate Debtor did not dispute the fact that the operational debt of more than Rs. 17, 62, 920/- is due and payable by it to the Operational Creditor. It has also admitted that the payment of operational debt could not be made due to peculiar financial position that has arisen due to COVID-19 pandemic. Since the Corporate Debtor admitted the existence of its debt and the default and also admitted that he did not make any payment in-spite of receipt of demand notice we did not go into details of his further explanation(s) given in reply. Suffice to say that the Corporate Debtor admitted that in-spite of receipt of demand notice from the Operational Creditor it could not make payment of operational debt due and payable due to his weak financial condition. The fact proved on record is that the Corporate Debtor is an insolvent and its insolvency has to be resolved by the process of law - application for CIRP admitted - application is defect free and is admitted - moratorium declared.

Summary

Issues: Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process due to default in operational debt payment.

Analysis:
1. Operational Debt Default: The application was filed against the Corporate Debtor for defaulting on the payment of operational debt amounting to Rs. 20,15,647. The Operational Creditor had sold and supplied goods to the Corporate Debtor, who failed to make the payment as agreed, leading to the initiation of the insolvency resolution process.

2. Admission of Debt: The Corporate Debtor admitted the existence of the debt and default due to financial constraints exacerbated by the COVID-19 pandemic. Despite not disputing the operational debt of over Rs. 17,62,920, the Corporate Debtor did not make any payment even after receiving a demand notice, prompting the Tribunal to admit the Corporate Debtor into the insolvency resolution process.

3. Adjudication and Moratorium: The Tribunal declared a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, prohibiting various actions against the Corporate Debtor, including institution of suits, transferring assets, enforcing security interests, and property recovery. The moratorium would be in effect until the completion of the resolution process or approval of a resolution plan.

4. Appointment of IRP: Mr. Jaykumar Pesumal Arlani was appointed as the Interim Resolution Professional (IRP) to oversee the Corporate Insolvency Resolution Process. The IRP is tasked with conducting the resolution process as per the provisions of the Code and regulations, with the obligation to protect and preserve the Corporate Debtor's assets and manage its operations.

5. Operational Creditor's Obligations: The Operational Creditor was directed to pay an advance of Rs. 50,000 to the IRP for the smooth conduct of the resolution process. Additionally, the IRP was authorized to request further interim funds as per rules, emphasizing the importance of cooperation from all parties involved in the process.

6. Procedural Directives: The Tribunal directed the IRP to make a public announcement of the initiation of the resolution process, call for submission of claims, and ensure the continuity of goods/services supply to the Corporate Debtor during the moratorium period. The Registry was instructed to communicate the order to relevant parties and upload it on the website promptly.

This detailed analysis outlines the key aspects of the judgment, including the debt default, admission by the Corporate Debtor, moratorium declaration, appointment of the IRP, operational creditor's obligations, and procedural directives for the resolution process.