2022 (1) TMI 454 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - assignment of debt - existence of debt and dispute or not - HELD THAT - The Operational Creditor has established that as per Section 5(20) of the Insolvency and Bankruptcy Code, 2016, an Operational Creditor means a person whom an operational debt is owned and includes any person to whom such debt has been legally assigned or transferred - In this matter, Samsung C T Corporation (Insured) had legally assigned Operational Debt, that is due and payable by Corporate Debtor, to Korea Trade Insurance Corporation i.e., Operational Creditor, vide letter of Assignment dated 08.09.2020. Therefore, Korea Trade Insurance Corporation is deemed to be Operational Creditor by virtue of a valid Assignment. The claim of the Corporate Debtor that the materials supplied are of inferior quality and could not be used by Corporate Debtor was not supported by any documentary evidence. The Corporate Debtor was not able to produce any evidence to show that there is a pre-existing dispute in the instant case - the nature of the Debt is an 'Operational Debt' as defined under Section 5(21) of the Definitions under the Code. There is a Default as defined under Section 3(12) of the Code on the part of the Corporate Debtor. The application made by the Operational Creditor is complete in all respects as required by law, and it clearly shows that the operational debt has not been paid by the Corporate Debtor - application admitted - moratorium declared.

Issues Involved:
1. Validity of the assignment of operational debt.
2. Existence of a pre-existing dispute regarding the quality of goods supplied.
3. Qualification of the claim as an "Operational Debt" under the Insolvency and Bankruptcy Code, 2016.
4. Entitlement of the Operational Creditor to initiate Corporate Insolvency Resolution Process (CIRP).
5. Appointment of an Interim Resolution Professional.

Issue-wise Detailed Analysis:

1. Validity of the Assignment of Operational Debt:
The Operational Creditor, Korea Trade Insurance Corporation, filed the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, based on a debt assigned by Samsung C & T Corporation. The Corporate Debtor contested the validity of the Letter of Assignment dated 08.09.2020, arguing that the assignment was invalid without their consent. The Tribunal found that the Operational Creditor met the definition under Section 5(20) of the Code, as the debt was legally assigned, making Korea Trade Insurance Corporation the valid Operational Creditor.

2. Existence of a Pre-existing Dispute:
The Corporate Debtor claimed that the goods supplied were defective and raised a dispute regarding the quality of goods and related detention charges. However, the Tribunal noted that the Corporate Debtor failed to provide documentary evidence supporting the existence of such a dispute. The Tribunal concluded that there was no "pre-existing dispute" as defined under Section 5(6) of the Code, thus dismissing the Corporate Debtor's claims.

3. Qualification of the Claim as an "Operational Debt":
The Tribunal examined whether the claim qualifies as an "Operational Debt" under Section 5(21) of the Code. It was established that the debt owed to Samsung C & T Corporation, and subsequently assigned to Korea Trade Insurance Corporation, was indeed an operational debt. The Tribunal also noted the default by the Corporate Debtor under Section 3(12) of the Code, confirming the nature of the debt.

4. Entitlement of the Operational Creditor to Initiate CIRP:
The Tribunal found that the application by the Operational Creditor was complete and met all legal requirements. The operational debt remained unpaid by the Corporate Debtor, entitling the Operational Creditor to initiate the Corporate Insolvency Resolution Process (CIRP). The Tribunal admitted the application under Section 9(5) of the Code, leading to the initiation of CIRP against the Corporate Debtor.

5. Appointment of an Interim Resolution Professional:
The Tribunal appointed Mr. Krishna Raj M. as the Interim Resolution Professional (IRP) to carry out the functions under the Code. The IRP was directed to submit his consent and comply with the necessary regulations. The Operational Creditor was instructed to deposit a sum of ?2 lakhs with the IRP to cover initial expenses, subject to adjustment by the Committee of Creditors.

Order:
The Tribunal admitted the application for initiating CIRP against the Corporate Debtor and imposed a moratorium as per Section 14(1) of the Code, prohibiting certain actions against the Corporate Debtor. The moratorium would be effective from the date of the order until the completion of the CIRP or until the resolution plan is approved or liquidation is ordered. The Tribunal also directed the public announcement of the CIRP and immediate communication of the order to all relevant parties.

Dated: 21st December, 2021.

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