Tribunal initiates insolvency proceedings under Section 9 - safeguarding assets during resolution

The Tribunal upheld the petition under section 9 of the Insolvency & Bankruptcy Code, 2016, against the Corporate Debtor for non-payment of dues, initiating the Corporate Insolvency Resolution Process (CIRP) and imposing a moratorium to safeguard the Corporate Debtor's assets during resolution. An Insolvency Professional was appointed as the Interim Resolution Professional (IRP) to oversee the process, with the Operational Creditor required to deposit funds for IRP expenses. The IRP was tasked with adhering to the Code's provisions and submitting a report to the Adjudicating Authority.

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Issues:
1. Invocation of section 9 of the Insolvency & Bankruptcy Code, 2016 for non-payment of dues by the Corporate Debtor.

Detailed Analysis:

Issue 1: Invocation of section 9 of the Insolvency & Bankruptcy Code, 2016
The petition was filed under section 9 of the Insolvency & Bankruptcy Code, 2016 by the Operational Creditor against the Corporate Debtor for non-payment of dues amounting to Rs. 5,08,000. The Operational Creditor was employed as the Sales Head by the Corporate Debtor as per an offer letter, which stated an annual salary of Rs. 18,50,000 and a minimum employment tenure of one year. Despite regular work and salary payments being made once in two months, the Operational Creditor faced delays in salary payments. Upon resignation, the Corporate Debtor failed to pay the outstanding salary and incentives, even deducting amounts under Tax Deduction at Source (TDS) without submission to the Income Tax Department.

The Operational Creditor served a Demand Notice under Form 3 of the Insolvency and Bankruptcy Code, 2016, to which the Corporate Debtor denied all claims. The petition, filed within the limitation period, proceeded ex parte as the Corporate Debtor did not oppose. The Tribunal admitted the petition, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor under section 14 of the Code. The moratorium under section 14 was imposed, preventing suits, asset transfers, and enforcing security interests against the Corporate Debtor.

The Tribunal appointed an Insolvency Professional as the Interim Resolution Professional (IRP) to oversee the CIRP process. The Operational Creditor was directed to deposit Rs. 2 lakhs for IRP expenses, to be reimbursed as CIR costs. The petition was admitted, and the IRP was tasked with following the Code's provisions and submitting a report to the Adjudicating Authority.

In conclusion, the Tribunal upheld the petition under section 9 of the Insolvency & Bankruptcy Code, 2016, against the Corporate Debtor for non-payment of dues, initiating the CIRP process and imposing a moratorium to protect the Corporate Debtor's assets during resolution.

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