2022 (9) TMI 11 - 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 - time limitation - HELD THAT - It is now well settled that the period of limitation for an Application seeking initiation of the CIRP under Section 9 of the Code is governed by Article 137 of the Limitation Act and is, therefore 3 years from the date when the 'Right to Apply' accrues i.e., failure to clear the dues. As the debt has been duly acknowledged by the Corporate Debtor on 16.03.2017, accordingly, the limitation period will be reckoned from 16.03.2017. Thus the present Application which has been filed within three years from 16.03.2017 as prescribed in Article 137 of the Limitation Act successfully survives the bar of Limitation. Threshold limit for filing application - HELD THAT - In order to initiate the CIRP against a Corporate Debtor on an Application filed by the Operational Creditor before 24.03.2020, it must primarily qualify the threshold limit of Rs. 1 lakh. It is pertinent to mention here that the Notification regarding the enhancement of minimum amount of default to one crore for the purpose of Section 4 was issued by the Ministry of Corporate Affair on 24th March, 2020 and the amount defaulted by the Corporate Debtor and filing of the petition was before that i.e. on 01.03.2020. Since any notification issued by the Government are generally Prospective in nature unless specifically expressed, hence the notification is not applicable to the present case - the instant Application satisfies the pecuniary criteria under Section 9 of the Code, 2016. This Authority is satisfied that there is an outstanding operational debt as well as there is default by the corporate debtor. Considering the facts and circumstances in which this debt has arisen, the nature of the Debt is an 'Operational Debt' as defined under section 5 (21) of the Definitions under the Code and there is a Default also as defined under section 3 (12) of the Code on the part of the Corporate Debtor. This Authority is of the firm view that there was default on the part of the respondent in pursuance of invoices raised on behalf of the applicant. Accordingly, the present application stands admitted in terms of Section 9(5) of the Code and CIRP is hereby ordered to be initiated against the respondent Corporate Debtor, forthwith - Application admitted - moratorium declared.

Summary

Issues:
1. Application under section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.
2. Claim of operational creditor for unpaid debt against the corporate debtor.
3. Objections raised by the corporate debtor regarding the quality of materials supplied.
4. Determination of the limitation period for the application.
5. Compliance with the pecuniary criteria under Section 9 of the Code.
6. Admission of liability and default by the corporate debtor.
7. Appointment of an Interim Resolution Professional.
8. Deposit of funds by the operational creditor with the Interim Resolution Professional.
9. Declaration of moratorium under Section 14 of the Code.

Analysis:

The judgment pertains to an application filed under section 9 of the Insolvency and Bankruptcy Code, 2016 by an operational creditor seeking initiation of Corporate Insolvency Resolution Process against the respondent company, claimed to be the corporate debtor. The operational creditor alleged non-payment of dues amounting to Rs. 6,72,844/- and issued a Demand Notice. The corporate debtor, in response, raised objections regarding the quality of materials supplied and disputed the interest amount claimed. The Tribunal addressed the issue of limitation, determining that the application was filed within the prescribed period, thus surviving the bar of limitation.

Regarding the pecuniary criteria, the Tribunal found that the application met the threshold limit of Rs. 1 lakh before the notification enhancing the minimum default amount to one crore came into effect. The Tribunal analyzed the objections raised by the corporate debtor regarding the quality of materials supplied, noting the lack of evidence to support the contentions. Consequently, the Tribunal held that the corporate debtor had admitted liability to the tune of Rs. 4,36,912/-, establishing the existence of an operational debt and default.

The Tribunal admitted the application under Section 9(5) of the Code, ordering the initiation of Corporate Insolvency Resolution Process against the corporate debtor. Mr. Ramkripal Sharma was appointed as the Interim Resolution Professional, and the operational creditor was directed to deposit funds to meet expenses. A moratorium was declared under Section 14 of the Code, imposing restrictions on various actions against the corporate debtor during the resolution process. The judgment emphasized compliance with regulations and obligations by the Interim Resolution Professional and other involved parties, highlighting the importance of cooperation and adherence to legal requirements.

The Tribunal directed communication of the order to the relevant parties, including the applicant, corporate debtor, and the appointed Interim Resolution Professional. Additionally, copies of the order were to be forwarded to the Insolvency and Bankruptcy Board of India (IBBI) and the Registrar of Companies (ROC) for necessary compliance and record-keeping purposes.