2019 (4) TMI 1938 - Tri - Insolvency and Bankruptcy

Operational Creditor Wins: Corporate Insolvency Process Commences

The tribunal found in favor of the Operational Creditor, admitting the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - pre-existing dispute or not - time limitation - HELD THAT:- It appears that the Corporate Debtor is taking every efforts to starve off the proceedings initiated by the Operational Creditor under the provisions of the I&B Code, 2016. As regards the limitation issue, it is noted that the claim has been filed on the basis of a Decree passed by the Civil Court. The time period for execution of any Decree under Article 136 of the Limitation Act, 1963 is 12 years. In other words, the Decree holder has every right to demand the decretal amount during the said period. Therefore, this right cannot be curtailed by taking a view that as per the provisions of Article 137 of the Limitation Act, 1963, the time period for filing Application under Section 9 of the I&B Code, 2016 is three years only. But, this Article will not be applicable to the demand made under the Decree passed by the Civil Court. Therefore, the Application filed under Section 9 of the I&B Code, 2016 by the Operational Creditor is within the period of limitation. Hence, the objection that has been raised by the Counsel for the Corporate Debtor that the Application is time barred stands rejected. The multifaceted defence that has been projected by the Corporate Debtor is inconsistent and a mere bluster. Therefore, the pleas taken by the Corporate Debtor including the plea about existing of dispute, stand rejected. The Operational Creditor has fulfilled all the requirements of law for admission of the Application. This Bench is satisfied that the Corporate Debtor has committed default in making payment of the outstanding debt claimed by the Operational Creditor. Therefore, Application is admitted and the commencement of the Corporate Insolvency Resolution Process is ordered which ordinarily shall get completed within 180 days, reckoning from the day this order is passed - Application admitted - moratorium declared. Issues Involved:1. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.2. Existence of a dispute regarding the operational debt.3. Limitation period for filing the application.4. Appointment of Interim Resolution Professional (IRP).5. Declaration of moratorium.Issue-wise Detailed Analysis:1. Maintainability of the Application:The application under adjudication, CPI 872/2018, was filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code). The prayer was to admit the application, initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, declare moratorium, and appoint an Interim Resolution Professional (IRP). The Corporate Debtor contested the application, stating it was not maintainable in law, barred by limitation, and vexatious. However, the tribunal found that the Operational Creditor had fulfilled all the requirements of law for the admission of the application, and it was admitted.2. Existence of a Dispute:The Corporate Debtor argued that there was an existing dispute, referencing the Mobilox Innovations Private Limited vs. Kirusa Software Private Limited case, which mandates that the adjudicating authority must reject the application if a genuine dispute exists. However, the tribunal noted that a decree had been passed by the Civil Court in favor of the Operational Creditor, which was contested by the Corporate Debtor but not stayed by the High Court. Thus, there was no genuine dispute regarding the operational debt, and the contention of the Corporate Debtor was rejected.3. Limitation Period:The Corporate Debtor argued that the application was time-barred under Article 137 of the Limitation Act, 1963, which prescribes a three-year period. However, the tribunal clarified that the application was based on a decree passed by the Civil Court, and under Article 136 of the Limitation Act, 1963, the time period for execution of any decree is 12 years. Therefore, the application was within the limitation period, and the objection was rejected.4. Appointment of IRP:The Operational Creditor proposed Mr. S. Sivarama Krishnan as the IRP. The tribunal appointed him as the IRP, noting that there were no disciplinary proceedings pending against him. The IRP was directed to take charge of the Corporate Debtor's management immediately and comply with the relevant provisions of the I&B Code.5. Declaration of Moratorium:The tribunal declared a moratorium, effective from the date of the order until the completion of the CIRP. The moratorium prohibited the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of any assets, and recovery of any property by an owner or lessor. Essential goods or services to the Corporate Debtor were not to be terminated or suspended during the moratorium period.Conclusion:The tribunal found that the Corporate Debtor had committed default in making payment of the outstanding debt claimed by the Operational Creditor. The application was admitted, and the CIRP was ordered to commence. The moratorium was declared, and Mr. S. Sivarama Krishnan was appointed as the IRP. The tribunal directed the Operational Creditor and the Registry to send a copy of the order to the IRP immediately. The order was pronounced in open court.