2017 (11) TMI 99 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - proof of Corporate Debtor committing a default - Held that - It is evident that Corporate Debtor has committed default and the amount @ ₹ 4,50,000/- plus 2% of the profit after tax has not been paid since 01.06.2016. The invoices have been raised (Annexure-2 (Colly) and there is default committed within the meaning of Section 3(12) read with Section 4 and Section 9 (1) of the Code, 2016. The notice under Section 8 of the Code has been duly served. Even the bank statement (Annexure-4 and 5) have been filed to satisfy the requirement of Section 9(3)(c) of the Code. The Operational Creditor has also proposed the name of Interim Insolvency Professional namely Mr. Deepak Arora, 23 Ka 4, Jyoti Nagar, Near Vidhan Sabha, Jaipur-302005, [email protected], who has made declaration in accordance with the provisions of Rule 9 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. As a sequel to the above discussion, this petition is admitted and Mr. Deepak Arora is appointed as an Interim Resolution Professional. His registration number is IBBI/IPA- IP/00032/2016-17/1049. In pursuance of section 13 (2) of Code, we direct that -t Interim Insolvency Resolution Professional shall immediately make public announcement with regard to admission of this application under Section 7 of the Code. We also declare moratorium in terms of Section 14 of the Code.

Issues Involved:
1. Validity of the demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016.
2. Status of the petitioner as an 'Operational Creditor'.
3. Existence of an operational debt and default by the Corporate Debtor.
4. Appointment of an Interim Resolution Professional.
5. Declaration of moratorium under Section 14 of the Code.

Issue-wise Detailed Analysis:

1. Validity of the demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016:

The Corporate Debtor contended that the demand notice issued by the Operational Creditor was not valid under Section 8 of the Code. The Tribunal, however, found this argument to be without substance. The demand notice was issued in a proper proforma as per Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Tribunal noted that the dispute raised by the Corporate Debtor regarding the approval of invoices by the Managing Director was illusory and not supported by any evidence of past payments varying due to such approvals.

2. Status of the petitioner as an 'Operational Creditor':

The Tribunal examined the definitions of 'Operational Creditor' and 'Operational Debt' under Sections 5(20) & (21) of the Code. It concluded that the petitioner, who provided management consultancy services to the Corporate Debtor, fits the definition of an Operational Creditor. The services rendered under the consultancy agreement dated 01.07.2015 were acknowledged, and the Tribunal assumed the provision of services as per the agreement, thus affirming the petitioner's status as an Operational Creditor.

3. Existence of an operational debt and default by the Corporate Debtor:

The Tribunal reviewed the consultancy agreement and the invoices raised by the Operational Creditor. It was established that the Corporate Debtor had defaulted in making payments since 01.06.2016. The Tribunal noted that the remuneration was a fixed amount payable monthly and not dependent on any variable factors. The total debt claimed amounted to ?54,01,973/-, including monthly remuneration, 2% of the profit after tax for the financial year 2015-16, and interest at 18% per annum. The Tribunal concluded that there was a default in respect of an operational debt.

4. Appointment of an Interim Resolution Professional:

The Operational Creditor proposed the name of Mr. Deepak Arora as the Interim Resolution Professional, who met the requirements under Section 7(3)(b) of the Code. The Tribunal appointed Mr. Deepak Arora as the Interim Resolution Professional, with registration number IBBI/IPA-IP/00032/2016-17/1049, and directed him to make a public announcement regarding the admission of the application under Section 7 of the Code.

5. Declaration of moratorium under Section 14 of the Code:

The Tribunal declared a moratorium as per Section 14 of the Code, which included prohibitions on:
- Institution or continuation of suits or proceedings against the Corporate Debtor.
- Transferring, encumbering, alienating, or disposing of any assets of the Corporate Debtor.
- Actions to foreclose, recover, or enforce any security interest created by the Corporate Debtor.
- Recovery of any property by an owner or lessor occupied by the Corporate Debtor.

The Tribunal clarified that the moratorium would not apply to transactions notified by the Central Government or to the supply of essential goods or services to the Corporate Debtor during the moratorium period. The Interim Resolution Professional was directed to preserve the value of the Corporate Debtor's property and perform his functions in accordance with the Code.

Conclusion:
The petition was admitted, and the Tribunal directed the Interim Resolution Professional to proceed with the insolvency resolution process, ensuring compliance with the provisions of the Insolvency and Bankruptcy Code, 2016.

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