2022 (5) TMI 921 - 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 - In the instant case there is an operational debt and there has been a default in repayment of the same and that this Adjudicating Authority is satisfied that the Operational Creditor has proved its case by placing evidence that default has occurred for which the Corporate Debtor was liable to pay. Hence, the contentions of the Corporate Debtor are overruled - the Operational Creditor has fulfilled all the stipulations as required under the provisions of the IB Code, 2016 for the purpose of initiating Corporate Insolvency Resolution Process. In these circumstances, having satisfied with the submissions made by the Petitioner/Operational Creditor, this Adjudicating Authority is inclined to admit the instant Application. Petition admitted - moratorium declared.

Issues Involved:
1. Maintainability of the application filed by the Operational Creditor.
2. Definition and classification of the claimed amount as 'Operational Debt'.
3. Existence of a disputed claim and counterclaims by the Corporate Debtor.
4. Fulfillment of statutory requirements for initiating Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Maintainability of the application filed by the Operational Creditor:
The Corporate Debtor argued that the application was not maintainable because it was not filed by a duly authorized person. However, the tribunal noted that a Board Resolution authorizing Shri Narendra Kumar to represent the Applicant Company was annexed as Exhibit-2 to the application, certified by the Director on 18.11.2019. Therefore, the tribunal concluded that the application was filed by a duly authorized person and rejected this technical ground.

2. Definition and classification of the claimed amount as 'Operational Debt':
The Corporate Debtor contended that the claimed amount, comprising marketing fees and security deposit refunds, did not qualify as 'Operational Debt' under Section 5(21) of the Insolvency & Bankruptcy Code, 2016. The tribunal referred to the definitions of 'Operational Debt' and 'Operational Creditor' in Sections 5(21) and 5(20) respectively. It was clarified that any debt arising from the provision of goods or services falls within the definition of 'Operational Debt'. The tribunal confirmed that the Applicant and ILPL provided marketing services and raised invoices, which constituted a business relationship. The tribunal cited the Supreme Court's differentiation between financial and operational creditors in Swiss Ribbons Pvt. Ltd. vs. Union of India, concluding that the claimed amount fell within the definition of 'Operational Debt' and the Applicant was an 'Operational Creditor'.

3. Existence of a disputed claim and counterclaims by the Corporate Debtor:
The Corporate Debtor argued that the claimed amount was disputed and that it had counterclaims against the Applicant. The tribunal noted that the Applicant had invoked the arbitration clause due to defaults by the Corporate Debtor, resulting in two separate arbitration awards dated 11.04.2019 in favor of the Applicant. The Corporate Debtor's appeals against these awards were dismissed by the Delhi High Court and the Supreme Court. Thus, the tribunal held that the disputes were resolved by the arbitration awards, and the argument of a disputed claim was not tenable.

4. Fulfillment of statutory requirements for initiating Corporate Insolvency Resolution Process (CIRP):
The tribunal observed that the Applicant had fulfilled all the necessary stipulations under the Insolvency & Bankruptcy Code, 2016 for initiating CIRP. The tribunal was satisfied that the Operational Creditor had proven the default by the Corporate Debtor and met the requirements for admission of the application. Consequently, the tribunal admitted the application, ordered the commencement of CIRP, and appointed Mr. Rajesh Donkeshwar as the Interim Resolution Professional (IRP).

Conclusion:
The tribunal admitted the petition filed by the Operational Creditor, ordered the commencement of CIRP, and declared a moratorium as per Section 14 of the Insolvency & Bankruptcy Code, 2016. The IRP was directed to take charge of the Corporate Debtor's management, make a public announcement, and call for claims. The tribunal also directed the Operational Creditor to pay an advance fee for the IRP and expenses towards CIRP. The tribunal's order was to be communicated to the relevant parties and the Registrar of Companies for updating the status of the Corporate Debtor.

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