Company petitions admitted for insolvency due to default in repaying debts

The Tribunal admitted the company petitions under Section 9(5)(2) of the Insolvency and Bankruptcy Code due to the corporate debtor's default in repaying operational debts, establishing insolvency. The Memorandum of Understanding (MOU) was deemed ineffective in absolving debt liability, and the defence of fraud by the corporate debtor was dismissed. The petition filing and ratification were validated, and liabilities written off based on the MOU were not legally binding. A moratorium was imposed, and the matter was referred to the Insolvency & Bankruptcy Board Of India for the nomination of an Insolvency Resolution Professional.

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Issues:
Admission of company petitions under Section 9(5)(2) of the Insolvency and Bankruptcy Code - Default in payment of debts by the corporate debtor to operational creditors - Validity of Memorandum of Understanding (MOU) in relation to debts - Legal status of corporate debtor as insolvent - Defence of alleged fraud by the corporate debtor - Filing of petition by authorized signatory and ratification by operational creditor company - Validity of writing off liabilities based on MOU - Application of Sections 13 & 14 of the I & B Code, 2016 - Imposition of moratorium - Referral to Insolvency & Bankruptcy Board Of India for nomination of Insolvency Resolution Professional.

Analysis:
The Tribunal found the applications complete under Section 9(5)(2) of the Insolvency and Bankruptcy Code, leading to the admission of the company petitions due to the corporate debtor's default in repaying operational debts. Despite invoices raised and goods delivered, payments were not made, indicating insolvency. The Tribunal emphasized the lack of privity of contract between operational creditors and other creditors regarding a Memorandum of Understanding (MOU), rendering the MOU ineffective in absolving debt liability. The legal status of the corporate debtor as insolvent was established based on non-payment of debts, justifying action under the Sales of Goods Act.

The Tribunal dismissed the corporate debtor's speculative defence of fraud, citing statutory returns, auditors' reports, and purchase records contradicting the defence. The filing of the petition by the authorized signatory and its ratification by the operational creditor company were deemed valid, following a Larger Bench decision and Supreme Court precedent on retrospective validation. The Tribunal highlighted that liabilities written off based on the MOU lacked privity of contract and creditor consent, thus not holding legal sanctity.

Based on the facts and judicial precedents, the Tribunal allowed the petition, admitting the company's insolvency. A moratorium was imposed under Sections 13 & 14 of the I & B Code, 2016, restraining suits, asset transfers, and enforcement actions against the corporate debtor. The matter was referred to the Insolvency & Bankruptcy Board Of India for nominating an Insolvency Resolution Professional within the specified timeframe. The Tribunal ordered a publication regarding the moratorium after the IRP's appointment, with no costs imposed in the judgment.

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