2021 (8) TMI 989 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT - The Operational Creditor has been able to make out a case for initiation of CIRP in respect of the Corporate Debtor. The plea of the Corporate Debtor that it had suffered heavy losses or is having cash crunch due to market response in the business or that it is trying to resolve the financial problems is in a way admission on the part of the Corporate Debtor. The Corporate Debtor had never raised any dispute prior to receipt of notice under section 8 of the Code. The Corporate Debtor has failed even to response to the Demand Notice sent under section 8 of the Code whereby the dispute if any existed could have been raised there is no hindrance in the admission of the application filed by the Operational Creditor. That application having complied with the provisions of Section 9(3)(b) and 9(3)(c) of the Code is complete in all respect - application admitted - moratorium declared.

Summary

Issues Involved
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Non-payment of outstanding invoices by the Corporate Debtor.
3. Compliance with mandatory provisions of Section 9 of the Insolvency and Bankruptcy Code, 2016.
4. Corporate Debtor's financial distress and inability to pay debts.
5. Admission of the application and declaration of moratorium.

Detailed Analysis

1. Initiation of Corporate Insolvency Resolution Process (CIRP)
The petition was filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of CIRP against the Corporate Debtor. The Operational Creditor supplied coal to the Corporate Debtor and raised invoices, some of which remained unpaid.

2. Non-payment of Outstanding Invoices
The Operational Creditor claimed a total debt of Rs. 21,89,769.54, including interest, due to the non-payment of invoices. Despite sending a Demand Notice on 9th August 2019, which was delivered on 14th August 2019, the Corporate Debtor neither replied nor raised any disputes regarding the claimed debt amount.

3. Compliance with Mandatory Provisions of Section 9 of the Insolvency and Bankruptcy Code, 2016
The Corporate Debtor argued that the application was defective and not in compliance with Sections 9(3)(b) and 9(3)(c) of the Code. However, the Tribunal found that the application met all necessary requirements, including the filing of relevant documents such as invoices, ledger statements, and an affidavit supporting the application.

4. Corporate Debtor's Financial Distress and Inability to Pay Debts
The Corporate Debtor admitted to financial distress and a cash crunch due to weak market response. They requested additional time to pay the debt, citing their efforts to revive the company. However, the Tribunal noted that the Corporate Debtor had acknowledged the debt and did not raise any disputes prior to receiving the Demand Notice.

5. Admission of the Application and Declaration of Moratorium
The Tribunal, after considering all pleadings and documents, admitted the application under Section 9 of the Code. The Tribunal declared a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, which prohibits:
- Institution or continuation of suits or proceedings against the Corporate Debtor.
- Transferring or disposing of any assets by the Corporate Debtor.
- Foreclosing or recovering any security interest created by the Corporate Debtor.
- Recovery of any property occupied by the Corporate Debtor.

The Tribunal appointed Mr. Jitendra Lohia as the Interim Resolution Professional (IRP) and directed the Operational Creditor to deposit Rs. 1,00,000 with the IRP. The IRP is to convene a meeting of the Committee of Creditors and submit a resolution plan within 105 days from the insolvency commencement date. The matter was listed for filing a progress report on 01.11.2021.

Orders
1. The application under Section 9 of the Insolvency & Bankruptcy Code, 2016, is admitted.
2. A moratorium is declared in accordance with Sections 13 and 15 of the Code.
3. The IRP is to make a public announcement and call for submission of claims.
4. The moratorium prohibits specific actions as outlined in Section 14 of the Code.
5. The IRP is to convene a meeting of the Committee of Creditors and identify a prospective Resolution Applicant.
6. The Operational Creditor is directed to deposit Rs. 1,00,000 with the IRP.
7. The Registry is directed to communicate the order to all concerned parties.
8. The matter is listed for a progress report on 01.11.2021.
9. Certified copies of the order may be issued to concerned parties upon compliance with requisite formalities.