2019 (4) TMI 2168 - Tri - IBC

Admissibility of section 9 application - initiation of CIRP against the Corporate Debtor - existence of default in payment by the Corporate Debtor or not - HELD THAT - The material documents filed by the petitioner clearly established that the Respondent failed to pay outstanding of Rs.15, 46, 34, 976.18/- respect of payment for supply of goods (i.e. steel and allied products) from the supplier i.e. Petitioner to the Respondent. The Respondent has also admitted its liability towards the Petitioner. The Petition is filed strictly in accordance with law and also suggested a qualified Resolution professional namely Mr. Shivadutt Bannanje with Registration No. IBBI/IPA-002/IP-N00266/2017-18/10779 to appoint as IRP. Therefore the said RP is provisionally qualified to be appointed as IRP. Hence this is a fit case to admit by initiating CIRP respect of Corporate Debtor with other consequential orders. Conclusion - The material documents filed by the petitioner clearly established that the Respondent failed to pay outstanding amount in respect of payment for supply of goods. Petition admitted - CIRP initiated - IRP was appointed - moratorium declared.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the petition filed under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, by the Operational Creditor to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor is maintainable.
• Whether there exists a default in payment by the Corporate Debtor to the Operational Creditor for the supplied goods, justifying the initiation of CIRP.
• Whether the appointment of an Interim Resolution Professional (IRP) is justified and in accordance with the provisions of the IBC, 2016.
• What are the implications of the moratorium declared under Section 14 of the IBC, 2016, upon the admission of the CIRP?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Maintainability of the Petition under Section 9 of the IBC, 2016

• Relevant legal framework and precedents: Section 9 of the IBC, 2016, provides the procedure for an Operational Creditor to initiate CIRP against a Corporate Debtor upon a default in payment.
• Court's interpretation and reasoning: The tribunal considered the petition filed by the Operational Creditor, which complied with the procedural requirements under the IBC, 2016, and the accompanying rules.
• Key evidence and findings: The Operational Creditor had supplied goods to the Corporate Debtor, and the outstanding payment was confirmed by the Corporate Debtor in a written communication.
• Application of law to facts: The tribunal found that the petition was filed in accordance with the law, and the debt was undisputed by the Corporate Debtor.
• Treatment of competing arguments: The Corporate Debtor did not dispute the debt and default, thereby supporting the maintainability of the petition.
• Conclusions: The petition under Section 9 was deemed maintainable, leading to the initiation of CIRP.

Issue 2: Existence of Default in Payment

• Relevant legal framework and precedents: The existence of a default is a prerequisite for initiating CIRP under the IBC, 2016.
• Court's interpretation and reasoning: The tribunal assessed the evidence presented, including invoices and written confirmations of outstanding amounts.
• Key evidence and findings: The Corporate Debtor acknowledged the outstanding amount of Rs. 15,46,34,976.18/- and failed to pay despite demand notices.
• Application of law to facts: The tribunal concluded that a default had occurred based on the unchallenged evidence of non-payment.
• Treatment of competing arguments: The Corporate Debtor admitted its inability to pay, which reinforced the finding of default.
• Conclusions: The tribunal confirmed the existence of a default, justifying the initiation of CIRP.

Issue 3: Appointment of Interim Resolution Professional (IRP)

• Relevant legal framework and precedents: Section 16 of the IBC, 2016, provides for the appointment of an IRP upon admission of a CIRP application.
• Court's interpretation and reasoning: The tribunal evaluated the qualifications and consent of the proposed IRP.
• Key evidence and findings: The proposed IRP, Mr. Shivadutt Bannanje, had provided written consent and was qualified as per IBC regulations.
• Application of law to facts: The tribunal found the appointment of the IRP to be in compliance with the IBC, 2016.
• Treatment of competing arguments: There were no objections to the appointment of the IRP from the Corporate Debtor.
• Conclusions: The tribunal appointed Mr. Shivadutt Bannanje as the IRP.

Issue 4: Implications of the Moratorium under Section 14 of the IBC, 2016

• Relevant legal framework and precedents: Section 14 of the IBC, 2016, imposes a moratorium on certain actions against the Corporate Debtor during the CIRP.
• Court's interpretation and reasoning: The tribunal outlined the scope and effects of the moratorium as per the statutory provisions.
• Key evidence and findings: The tribunal declared a moratorium, prohibiting actions such as suits, asset transfers, and recovery proceedings.
• Application of law to facts: The tribunal applied the moratorium provisions to protect the Corporate Debtor's assets during the CIRP.
• Treatment of competing arguments: The moratorium was uncontested by the parties and aligned with statutory requirements.
• Conclusions: The tribunal enforced the moratorium, effective from the date of the order until the completion of the CIRP.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "The material documents filed by the petitioner clearly established that the Respondent failed to pay outstanding of Rs.15,46,34,976.18/- respect of payment for supply of goods."
• Core principles established: The tribunal reaffirmed the principles of initiating CIRP upon an undisputed default and the procedural requirements for appointing an IRP.
• Final determinations on each issue: The petition was admitted, CIRP was initiated, the IRP was appointed, and a moratorium was declared, all in accordance with the IBC, 2016.