2022 (1) TMI 260 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - dispute on the short supply of goods delivered by the Operational Creditor - HELD THAT - It is seen from the e-mail communication dated 17.10.2020 filed in the typed set of documents filed by the Corporate Debtor, regarding the dispute of short supply was sent only after filing of this application - It is clear from the e-mail communication dated 04.09.2020 that the Corporate Debtor has acknowledged his default and there is no pre-existing dispute regarding short supply until 04.09.2020. Further, it is also pertinent to note that the default arising in the present Application is much prior to the advent of the Covid-19 pandemic and hence the Corporate Debtor also cannot seek shelter under Section 10A of IBC, 2016. Under the said circumstances, this Tribunal is left with no other option than to proceed with the present case and initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor. The Petition as filed by the Operational Creditor, is required to be admitted under Section 9(5) of the IBC, 2016 - Petition admitted - moratorium declared.

Issues Involved:
1. Admission of the application under Section 9 of the Insolvency & Bankruptcy Code, 2016.
2. Existence of debt and default by the Corporate Debtor.
3. Dispute regarding the short supply of goods by the Operational Creditor.
4. Application of Section 10A of IBC, 2016 in the context of the Covid-19 pandemic.
5. Appointment of the Interim Resolution Professional (IRP).
6. Initiation of the Corporate Insolvency Resolution Process (CIRP) and declaration of moratorium.

Detailed Analysis:

1. Admission of the Application under Section 9 of IBC, 2016:
The application, IBA/480/2020, was filed by the Operational Creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016 (IBC, 2016) read with Rule 6 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The prayer was to admit the application, initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, declare a moratorium, and appoint an Interim Resolution Professional (IRP).

2. Existence of Debt and Default by the Corporate Debtor:
The Operational Creditor claimed an outstanding debt of ?7,64,18,446.97, including principal and interest. It was averred that the last default occurred on 09.09.2019. The Corporate Debtor acknowledged a debt of ?7.19 Crore via email on 31.08.2019 and later issued cheques which were dishonored due to "funds insufficient." Subsequently, the Operational Creditor issued a Legal Notice under Sec. 138 of the Negotiation of Instruments Act and a Demand Notice in Form-3.

3. Dispute Regarding the Short Supply of Goods by the Operational Creditor:
The Corporate Debtor argued that the Operational Creditor had not supplied all items per the purchase orders, specifically lacking login credentials necessary for hardware functionality. The Corporate Debtor contended that the supply was incomplete, which hindered their project completion and payment from their client. However, the Tribunal noted that the dispute regarding short supply was raised only after the filing of the application and not during the initial demand notice period, as required by the precedent set in Mobilox Innovations Pvt. Ltd. v. Kirusa Software (P) Limited.

4. Application of Section 10A of IBC, 2016 in the Context of the Covid-19 Pandemic:
The Corporate Debtor argued that the default occurred due to the Covid-19 pandemic. However, the Tribunal found that the default predated the pandemic, and therefore, Section 10A of IBC, 2016, which provides relief for defaults occurring during the pandemic, was not applicable.

5. Appointment of the Interim Resolution Professional (IRP):
Since the Operational Creditor did not propose a specific IRP, the Tribunal appointed Ms. Asha Rathod as the IRP based on the latest list furnished by the Insolvency and Bankruptcy Board of India (IBBI). The IRP was directed to take necessary steps under Sections 15, 17, and 18 of the Code and file a report within 20 days.

6. Initiation of the Corporate Insolvency Resolution Process (CIRP) and Declaration of Moratorium:
The Tribunal admitted the application under Section 9(5) of IBC, 2016, and initiated the CIRP against the Corporate Debtor. Consequently, a moratorium was declared under Section 14(1), prohibiting the institution or continuation of suits, transferring of assets, and recovery actions against the Corporate Debtor. The moratorium would remain effective until the completion of the CIRP or approval of a resolution plan or liquidation order.

Conclusion:
The Tribunal, considering the facts and circumstances, admitted the petition filed by the Operational Creditor under Section 9(5) of IBC, 2016. The moratorium was declared, and Ms. Asha Rathod was appointed as the IRP. The Operational Creditor was directed to pay ?1,00,000 to the IRP for expenses. The order was communicated to relevant parties and authorities as mandated.

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