2017 (6) TMI 356 - Tri - Insolvency and Bankruptcy

Commencement of the corporate insolvency resolution process - outstanding debt - Held that - It is also an admitted fact that the outstanding amount payable by the corporate debtor to the operational creditor is not under dispute . We have perused the contents of the application along with the supporting documents placed on record the reply filed by the corporate debtor and considered the submissions of both of the counsels. After having satisfied that all the requirements under law have been fulfilled, we hereby allow the application of the operational creditor and order the commencement of the corporate insolvency resolution process which ordinarily shall get completed within 180 days, reckoning from the day this order is passed. We also appoint Shri V. Mahesh as interim insolvency professional who has been proposed by the operational creditor. He is directed to take charge of the corporate debtor immediately. He is also directed to cause public announcement as prescribed under Section 15 of the Code within three days from the date the copy of this order is received, and call for submissions of claim under section 15 of IBC 2016 in the manner as prescribed. We declare the moratorium which shall have effect from the date of this order till the completion of corporate insolvency resolution process, for the purposes referred to in Section 14 of the IBC 2016. The supply of essential goods or services to the corporate debtor as specified shall not be terminated or suspended or interrupted during moratorium period. It is further made clear that the provisions of sub-section (1) of Section 14 of the Code shall not apply to such transactions as notified by the Central Government in consultation with any financial sector regulator.

Summary

Issues Involved:
1. Adjudication of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC 2016).
2. Maintainability of the application based on objections raised by the corporate debtor.
3. Validity of statutory notice and application forms.
4. Dispute regarding the hypothecation agreement and ownership of supplied goods.
5. Definition of operational debt under IBC 2016.
6. Resolution of disputes through negotiations or arbitration.
7. Impact of a pending winding-up petition on the insolvency resolution process.
8. Appointment of an interim insolvency professional and declaration of moratorium.

Detailed Analysis:

1. The judgment addresses the application filed under Section 9 of IBC 2016 by an Operational Creditor against a Corporate Debtor for non-payment of outstanding dues amounting to a significant sum. The Operational Creditor provided goods and services to the Corporate Debtor, who defaulted on payments despite admitting the outstanding amount and agreeing to a payment schedule.

2. The Corporate Debtor raised objections regarding the maintainability of the application, including issues related to the statutory notice, application form compliance, ownership of supplied goods under a hypothecation agreement, and the pendency of a winding-up petition before the High Court of Madras.

3. The Tribunal dismissed objections related to the statutory notice and application form compliance, emphasizing that the substance of the notice and application is more critical than the form. The Tribunal also clarified that the Operational Creditor's lien over supplied goods does not absolve the Corporate Debtor from payment obligations, and the definition of operational debt under IBC 2016 includes a wide range of goods and services.

4. The Tribunal rejected objections concerning dispute resolution mechanisms in agreements, noting that such provisions do not prevent the initiation of insolvency resolution processes. Additionally, the pendency of a winding-up petition does not bar the commencement of corporate insolvency resolution under the Code.

5. The Tribunal acknowledged the lack of response from the Corporate Debtor and approved the Operational Creditor's application, initiating the corporate insolvency resolution process. An interim insolvency professional was appointed, and a moratorium was declared to protect the Corporate Debtor's assets during the resolution process, with exceptions for essential goods and services.

This comprehensive analysis covers the key issues addressed in the judgment, detailing the Tribunal's findings and decisions on each aspect raised by the parties involved in the insolvency proceedings.