2020 (10) TMI 679 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - This adjudicating authority is of the considered view that operational debt is due to the Applicant and it fulfilled the requirement of I B Code. That, service is complete and no dispute has been raised by the respondent at any point of time. That, Applicant is an Operational Creditor within the meaning of Section 5 sub-section 20 of the Code, From the aforesaid material on record, petitioner is able to establish that there exists debt as well as occurrence of default and the amount claimed by operational creditor is payable in law by the corporate debtor as the same is not barred by any law of limitation and/or any other law for the time being in force. Section 13 of the Code enjoins upon the Adjudicating Authority to exercise its discretion to pass an order to declare a moratorium for the purposes referred to in Section 14, to cause a public announcement of the initiation of corporate insolvency resolution and call for submission of claims as provided under Section 15 of the Code. Sub-section (2) of Section 13 says that public announcement shall be made immediately after the appointment of Interim Insolvency Resolution Professional. This Adjudicating Authority direct the Interim Resolution Professional to make public announcement of initiation of Corporate Insolvency Process and call for submission of claims under Section 15 as required by Section 13(1)(b) of the Code. Thus, it is evident that the corporate debtor has committed default in payment of operational debt and, therefore, it is a fit case to initiate Insolvency Resolution Process by admitting the Application under Section 9(5)(1) of the Code - petition admitted - moratorium declared.

Summary

Issues:
Application under Section 9 of The Insolvency and Bankruptcy Code, 2016 - Default in payment of operational debt - Adjudication of debt and default - Appointment of Interim Resolution Professional.

Analysis:
1. The operational creditor, a sole proprietor, filed a petition under Section 9 of The Insolvency and Bankruptcy Code, 2016, against the corporate debtor, a company registered under the Companies Act. The creditor alleged that the debtor had outstanding dues of ?17,67,909, including principal and interest, for pharmaceutical products supplied between November 2016 and February 2017.

2. Despite numerous reminders and a demand notice, the debtor failed to clear the dues. The creditor initiated the insolvency proceedings by issuing a demand notice under section 8 of the I & B Code. The debtor only paid ?2,50,000 against the total amount due, leading to a net claim of ?15,17,909 in the application.

3. The Tribunal noted that the respondent debtor did not appear or submit any response even after paper publication regarding the debt. The records indicated that the debtor neither disputed the debt nor raised any objections before the issuance of the notice under Section 8 of the I & B Code.

4. Relying on the documents and evidence provided by the operational creditor, the Tribunal found that the debt was established, and there was a clear default by the corporate debtor in payment of the operational debt. The Tribunal referenced the case law of Mobilox Innovative Private Limited vs. Kirusa Software Private Limited to assess the debt, default, and absence of dispute.

5. Based on the evidence and provisions of the Insolvency & Bankruptcy Code, the Tribunal concluded that the operational debt was due, and the creditor met the requirements of the Code. The Tribunal declared a moratorium, appointed an Interim Resolution Professional, and directed the public announcement of the initiation of the Corporate Insolvency Process.

6. The Tribunal ordered the moratorium to prohibit legal actions against the debtor, asset transfers, recovery of property, and ensured the continuity of essential services to the debtor during the moratorium period. The appointed Interim Resolution Professional was tasked with managing the insolvency resolution process.

7. The Tribunal communicated the order to all relevant parties and directed the Registry to inform the Registrar of Companies about the insolvency resolution process to prevent any actions that could hinder the liquidation process for the benefit of all stakeholders.