2022 (11) TMI 563 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - On perusal of the record it is seen that the applicant had entered into two agreements dated 07.12.2016 and 04.05.2019 with the corporate debtor. Copy of the promissory notes dated 07.12.2016 and 04.05.2019 are annexed. The corporate debtor has neither denied the debt nor raised any dispute of money received. On perusal of the reply filed it is seen that the corporate debtor has admitted the debt, though not as financial, but as operational debt. The contentions raised by the corporate debtor about maintainability of the application in its reply, are devoid of any merit. Thus, it is evident that the debt is due and payable and default has occurred. The present application is complete in terms of Section 7(5) of the Code. The applicant is entitled to claim its dues, establishing the default in payment of the financial debt beyond doubt. In light of the facts and records the present application is admitted and CIRP is ordered to be initiated against corporate debtor. Petition admitted - moratorium declared.

Issues:
1. Application under Section 7 of Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency against Corporate Debtor.
2. Validity of the debt and default by the Corporate Debtor.
3. Appointment of Insolvency Resolution Professional and initiation of Corporate Insolvency Resolution Process.

Issue 1: Application under Section 7 of Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency against Corporate Debtor

The Applicant, a limited company engaged in distribution of automotive paints, filed an application under Section 7 of IBC, 2016 against the Corporate Debtor, a private limited company involved in selling and repairing cars. The application sought to initiate the Corporate Insolvency process due to non-compliance by the Corporate Debtor with the terms of agreements and promissory notes, resulting in outstanding debt of Rs. 1,55,00,000. The Corporate Debtor failed to place purchase orders as per agreements, leading to the Applicant demanding repayment, which was not fulfilled, prompting the insolvency application.

Issue 2: Validity of the debt and default by the Corporate Debtor

The Corporate Debtor contended that the trade advance was not a financial debt under IBC, 2016. However, the Applicant argued that the agreements and promissory notes were not disputed by the Corporate Debtor, and the authorized representative was duly appointed to file the application. The Corporate Debtor admitted the debt as operational, not financial, and failed to raise any substantial dispute regarding the outstanding amount. The Tribunal found the debt due and payable, with default established, leading to the admission of the application under Section 7(5) of the Code.

Issue 3: Appointment of Insolvency Resolution Professional and initiation of Corporate Insolvency Resolution Process

The Tribunal admitted the application, ordering the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. Mr. Ajay Kumar Jain was appointed as the Insolvency Resolution Professional, subject to no pending disciplinary proceedings against him. The Applicant was directed to deposit Rs. 2.00 lacs with the Interim Resolution Professional for expenses. The moratorium under Section 14(1) of the Code was imposed on the Corporate Debtor, with further regulations to be followed during the moratorium period. The order was communicated to relevant parties, and compliance steps were outlined for updating records and data.

This detailed judgment by the National Company Law Tribunal, Ahmedabad Bench, addressed the application under IBC, 2016, highlighting the debt default by the Corporate Debtor, leading to the initiation of Corporate Insolvency Resolution Process and the appointment of an Insolvency Resolution Professional for further proceedings.

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