Adjudicating Authority Approves CIRP Against Corporate Debtor: Key Details and Steps

The Adjudicating Authority admitted the Operational Creditor's application to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. Mr. Arpan Maheshkumar Shah was appointed as the Interim Resolution Professional (IRP) to oversee the process. A moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 was declared, protecting the Corporate Debtor from various actions. The IRP was directed to make a public announcement of the CIRP, preserve assets, and manage operations. The Operational Creditor was instructed to pay an advance to the IRP for the smooth conduct of the CIRP.

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Issues: Application to initiate CIRP, Admissibility of the application, Appointment of IRP, Moratorium under Section 14, Public announcement of CIRP, Protection of assets during moratorium, Payment to IRP

Application to initiate CIRP:
The Operational Creditor filed an application to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, claiming an outstanding sum of Rs. 1,31,00,825, including interest. The Operational Creditor supplied packing material from May 2016 to March 2019, with partial payment received and a confirmation letter dated 13.05.2019. A notice of demand was issued under Section 8 of IBC, 2016, and the Corporate Debtor responded to it on 05.06.2019 and 12.06.2019. The Operational Creditor contended that there was no dispute, and the debt was within the limitation period. An affidavit under Section 9(3)(b) of IBC, 2016 was also filed, supporting the application's validity.

Admissibility of the application:
During the hearing, the Corporate Debtor's counsel sought adjournments, citing financial and legal issues faced by the Corporate Debtor, including challenges with GST authorities affecting payments. However, the Adjudicating Authority found that the application complied with all provisions of IBC, 2016, the debt was due and payable, not time-barred, and there was no pre-existing dispute. The claimed amount exceeded the threshold limit of Rs. 1 lakh. The Adjudicating Authority admitted the application, noting that the IRP's name would be appointed from the IBBI's maintained list.

Appointment of IRP:
Mr. Arpan Maheshkumar Shah was appointed as the Interim Resolution Professional (IRP) under Section 13(1)(c) of the Code. The IRP was tasked with conducting the Corporate Insolvency Resolution Process as per the provisions of the Insolvency and Bankruptcy Code, 2016, including functions outlined in Sections 17, 18, 20, and 21 of the Code. All personnel associated with the Corporate Debtor were legally obligated to assist the IRP, with non-compliance subject to appropriate action by the Adjudicating Authority.

Moratorium under Section 14:
The Adjudicating Authority declared a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, prohibiting various actions against the Corporate Debtor, including legal proceedings, asset transfers, enforcement of security interests, and property recovery by owners or lessors. The moratorium would be in effect until the completion of the Corporate Insolvency Resolution Process or until specific approvals or liquidation orders were issued.

Public announcement of CIRP and Protection of assets during moratorium:
The IRP was directed to make a public announcement of the initiation of the Corporate Insolvency Resolution Process (CIRP) and call for submission of claims as required by the Code. It was emphasized that the supply of goods or services to the Corporate Debtor should not be terminated during the moratorium period. The IRP was tasked with preserving the Corporate Debtor's assets and managing its operations as a going concern. The Operational Creditor was instructed to pay an advance to the IRP for the smooth conduct of the CIRP.

Payment to IRP:
The Operational Creditor was directed to pay an advance of Rs. 1,00,000 to the IRP within two weeks from the date of the order. The IRP was required to provide proof of receipt of the amount to the Adjudicating Authority along with the First Progress Report. Further demands for interim funds could be raised by the IRP as per rules. The application was allowed, and the Registry was instructed to communicate the order to relevant parties and upload it on the website promptly.

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