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2021 (5) TMI 305 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Failure to pay outstanding salary dues to the employees - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - no sufficient proof submitted by Corporate debtor with regard to their claim - HELD THAT - The arguments made by the Corporate Debtor is that incurring of losses due to the failures in managerial decisions and downfall in the business area of the Corporate Debtor had added more impact on the financial position of the Corporate Debtor and faced numerous difficulties to arrange funds and pay salaries to its employees. The counsel has not submitted any proof that they raised this service issues in response to Form-3 notice or demand notice nor thereafter. It appears to be an afterthought that they are raising this issue in their counter. After perusing the records, we are convinced that Operational Creditor has not received his dues from the Corporate Debtor and the submissions made by the Corporate Debtor in this regard appears to be after thought and was not submitted by any documentary evidence. The Operational Creditor is yet to receive his salary dues from the Corporate Debtor. The submissions made by the Corporate Debtor is not convincing and accordingly the application for CIRP of the Operational Creditor has been admitted. Application admitted - moratorium declared.
Issues Involved:
1. Whether the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 is maintainable. 2. Whether the Operational Creditor qualifies as an operational creditor under the provisions of the Insolvency and Bankruptcy Code, 2016. 3. Whether there was a default in payment of salary dues by the Corporate Debtor. 4. Whether there were deficiencies in the services rendered by the Operational Creditor. 5. Whether the Corporate Insolvency Resolution Process (CIRP) should be initiated against the Corporate Debtor. Issue-wise Detailed Analysis: 1. Maintainability of the Petition: The Corporate Debtor argued that the petition is devoid of merits, not maintainable, and should be dismissed in limini. However, the Tribunal found that the petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, read with Rule 6 of the Insolvency & Bankruptcy (Application to the Adjudicating Authority) Rules, 2016, seeking admission of the Petition, initiation of CIRP, granting moratorium, and appointment of an Interim Resolution Professional. The Tribunal admitted the petition, indicating its maintainability. 2. Qualification as an Operational Creditor: The Corporate Debtor contended that Mr. Ratna Prakash Golla does not qualify as an operational creditor under the provisions of the Insolvency and Bankruptcy Code, 2016. However, the Tribunal noted that the Operational Creditor was an employee to whom the Corporate Debtor owed payments towards salaries, thus qualifying him as an operational creditor under the Code. 3. Default in Payment of Salary Dues: The Operational Creditor alleged that the Corporate Debtor defaulted on an amount of ?10,03,417/- as of 30.07.2017. The Tribunal found that the Operational Creditor had rendered services without any remark and was regularly paid until June 2016. The Corporate Debtor made part payments but failed to clear the outstanding dues despite repeated requests and a demand notice. The Tribunal concluded that the Operational Creditor had not received his dues, and the Corporate Debtor's submissions appeared to be an afterthought without documentary evidence. 4. Deficiencies in Services Rendered: The Corporate Debtor argued that there were deficiencies in the services rendered by the Operational Creditor, which led to financial losses. However, the Tribunal found no documentary evidence supporting these claims. The Tribunal noted that the Corporate Debtor had not raised these service issues in response to the Form-3 notice or demand notice, suggesting that these claims were an afterthought. 5. Initiation of CIRP: Given the default in payment of salary dues and the lack of convincing evidence regarding deficiencies in services, the Tribunal decided to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Tribunal appointed Mr. Chandra Sekhar Arasada as the Interim Resolution Professional and declared a moratorium as per Section 14 of the Code, with specific directions to prohibit the institution of suits, continuation of pending suits, and other actions against the Corporate Debtor. Conclusion: The Tribunal admitted the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, initiated the Corporate Insolvency Resolution Process against the Corporate Debtor, and appointed an Interim Resolution Professional. The Tribunal also declared a moratorium and provided specific directions to ensure the smooth conduct of the CIRP.
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