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

Operational Creditor Wins: Corporate Insolvency Process Commences

M/s. Cortica Manufacturing (India) Private Limited Versus M/s. Victory Electricals Limited

M/s. Cortica Manufacturing (India) Private Limited Versus M/s. Victory Electricals Limited - TMI 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.