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2022 (8) TMI 998 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT - It is noted that there was a business relationship between the Operational Creditor and Corporate Debtor for which they have entered into barter agreements. Further, in Compliance with those agreements, the Operational Creditor has duly provided the services to the Corporate Debtor from time to time. Admittedly, the Corporate Debtor had paid the cash component to the Operational Creditor, as per those agreements but failed to transfer the part of the units (barter Component) to the value aggregating to Rs. 5,25,89,000/- as per Section 4 of the Code. The Demand Notice was sent on 30.12.2021. However, the Corporate Debtor neither disputed nor replied to the said Demand Notice. The Corporate Debtor admitted the debt to the extent of Rs. 5,25,89,000 due to the Operational Creditor in its affidavit in reply filed in response to Section 9 petition but expressed its inability to pay due to its financial constraints which arose because of demonetization, Covid-19, and other legal action taken by the Income Tax Department, Real Estate Regulatory Authority, etc. - there is a demand above the threshold limit and the Corporate Debtor has defaulted in paying that demand. As the date of default is 13.02.2020 and this application was filed on 10.03.2022 it is within the limitation. As per section 4 of the Code, this application meets the threshold limit. This application is complete and defect-free. Application admitted - moratorium declared.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) 2. Business relationship and barter agreements 3. Default in payment and non-transfer of units 4. Financial constraints and hardships faced by the Corporate Debtor 5. Admission of debt and inability to pay 6. Legal proceedings and moratorium Issue-wise Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP): The application was filed by M/s. D.B. Crop (Operational Creditor) under Section 9 of the Insolvency and Bankruptcy Code, 2016, for initiating CIRP against M/s. AG8 Ventures Private Limited (Corporate Debtor). The debt in default amounted to Rs. 10,77,17,000, including principal and interest. The tribunal admitted the Corporate Debtor into CIRP, declaring a moratorium as per Section 14(1) of the Code. 2. Business Relationship and Barter Agreements: The Operational Creditor and Corporate Debtor had entered into various barter agreements between 2010 and 2019 for advertisement services. The agreements stipulated that the Corporate Debtor would pay partly in cash/cheque and partly through the transfer/sale of units. 3. Default in Payment and Non-transfer of Units: The Operational Creditor provided advertisement services worth Rs. 11,74,22,441 under the barter agreements. While the Corporate Debtor paid the cash component, they failed to transfer 19 units valued at Rs. 5,25,89,000. Despite follow-ups and a legal notice, the Corporate Debtor did not fulfill its commitments, leading to the filing of the present petition under Section 9 of the Code. 4. Financial Constraints and Hardships Faced by the Corporate Debtor: The Corporate Debtor, an MSME engaged in real estate and construction, faced several financial hardships, including wrongful Income Tax recoveries, the rollout of GST, demonetization, and the COVID-19 pandemic. These events led to a disruption in their business operations and financial constraints, making it difficult to repay debts. 5. Admission of Debt and Inability to Pay: The Corporate Debtor admitted the debt of Rs. 5,25,89,000 but cited financial constraints as the reason for non-payment. The debtor expressed willingness to repay the principal amount when funds are available but denied the payment of interest. 6. Legal Proceedings and Moratorium: The tribunal noted that the Corporate Debtor did not dispute the demand notice and admitted the debt in their affidavit. The application was found to be complete and defect-free, meeting the threshold limit under Section 4 of the Code. Consequently, the tribunal declared a moratorium, prohibiting suits, transferring assets, and other actions against the Corporate Debtor as per Section 14(1) of the Code. The tribunal appointed Mr. Ishwar Lal Kalantri as the Interim Resolution Professional (IRP) and directed the IRP to make public announcements and manage the Corporate Debtor as a going concern. Order: 1. The Corporate Debtor is admitted into CIRP, and a moratorium is declared. 2. The IRP, Mr. Ishwar Lal Kalantri, is appointed. 3. The IRP is to perform functions under Sections 17, 18, 20, and 21 of the Code. 4. The IRP is directed to make public announcements and call for claims. 5. The supply of goods/services to the Corporate Debtor shall continue during the moratorium. 6. The Operational Creditor is to pay an advance of Rs. 2,00,000 to the IRP. 7. The Registry is directed to communicate the order to relevant parties and upload it on the website. The application CP(IB)/26/IND/2022 is allowed.
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