2021 (10) TMI 1180 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Service of demand notice - HELD THAT - The Bench notes that the Operational Creditor had supplied Furnishing Fabrics which the Corporate Debtor had duly received. It is also observed that the contentions raised by the Corporate Debtor with respect to discrepancy and incorrect debt amount are not supported by any documentary evidence. The Bench further notes that the Corporate Debtor vide its reply has also admitted that it was facing working capital issues, however, it is still committed to pay its outstanding debts legally payable after necessary adjustments which amounts to admission of debt and default by Corporate Debtor. Further, the Corporate Debtor also failed to reply to the Demand Notice within statutory period and has not raised any disputes before the filing of Reply to the present application. Therefore, no credence can be given to the contentions raised by the Corporate Debtor in the reply filed in this Company Petition. There are no valid grounds warranting the rejection of the above Company Petition as the debt and default are clearly established and the debt is also within limitation. The Operational Creditor has also suggested the name of proposed Interim Resolution Professional in part-3 of the Petition along with his consent letter in Form-2. Thus, the present Company Petition satisfies all the necessary requirements for admission. Petition admitted - moratorium declared.

Issues:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code.
2. Dispute regarding outstanding operational debt between Operational Creditor and Corporate Debtor.
3. Validity of the Demand Notice issued under Section 8 of the Code.
4. Allegations of non-payment and default by the Corporate Debtor.
5. Consideration of evidence and submissions by both parties.
6. Appointment of Interim Resolution Professional and initiation of CIRP.

Issue 1: Initiation of CIRP under Section 9 of the Insolvency and Bankruptcy Code:
The Company petition was filed by the Operational Creditor seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for an outstanding operational debt. The petition was filed in accordance with Section 9 of the Code and Rule 6 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

Issue 2: Dispute regarding outstanding operational debt:
The Operational Creditor alleged non-payment of dues by the Corporate Debtor despite supplying Furnishing Fabrics under different invoices. The Corporate Debtor, on the other hand, disputed the amount claimed, citing adjustments for additional expenses incurred due to the Operational Creditor's failure to fulfill contractual obligations. The Bench noted the contentions and examined the documentary evidence presented by both parties.

Issue 3: Validity of the Demand Notice under Section 8 of the Code:
The Operational Creditor issued a Demand Notice as per Section 8 of the Code, demanding payment of the outstanding debt. The Corporate Debtor failed to reply to the Notice within the stipulated period and did not raise any disputes before the filing of the Reply. The Bench found the Demand Notice to be valid and in compliance with the statutory requirements.

Issue 4: Allegations of non-payment and default by the Corporate Debtor:
The Corporate Debtor denied the allegations of non-payment and default, claiming adjustments for additional expenses incurred due to the Operational Creditor's alleged failure to meet contractual obligations. However, the Bench found the Corporate Debtor's contentions unsupported by sufficient documentary evidence and noted the admission of debt and default by the Corporate Debtor in its reply.

Issue 5: Consideration of evidence and submissions:
After reviewing the submissions, documents, and contentions of both parties, the Bench concluded that there were no valid grounds for rejecting the Company Petition. The debt and default were deemed to be established, and the Operational Creditor had fulfilled all necessary requirements for admission, including proposing an Interim Resolution Professional.

Issue 6: Appointment of Interim Resolution Professional and initiation of CIRP:
Based on the findings and considerations, the Tribunal admitted the Company Petition, ordered the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor, and appointed an Interim Resolution Professional. Various directions were issued regarding the CIRP process, moratorium, management of the Corporate Debtor, and communication of the order to relevant authorities.

In conclusion, the Tribunal admitted the Company Petition, initiated the CIRP against the Corporate Debtor, and appointed an Interim Resolution Professional to oversee the process. The decision was based on the establishment of debt and default, compliance with statutory requirements, and the lack of valid grounds for rejection. The Tribunal's detailed analysis considered the submissions, evidence, and contentions of both parties, leading to the issuance of specific directions for the CIRP proceedings.

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