2019 (7) TMI 1843 - Tri - Insolvency and Bankruptcy

Tribunal rules in favor of Applicant in insolvency case, imposes moratorium to protect supplies.

M/s FAMOUS INNOVATIONS DIGITAL CREATIVE PVT. LTD. Versus M/s MODE ADVERTISING AND MARKETING PVT. LTD.

The Tribunal initiated the corporate insolvency resolution process against the Respondent for defaulting on dues. It ruled in favor of the Applicant, ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditor - existence of debt and dispute or not - territorial jurisdiction - Service of notice - HELD THAT:- The points raised by the Respondent are all technical in nature. The arbitration clause in the MOU cannot be a bar for the present proceedings as the Code will prevail over such a clause by virtue of Section 238 of the Code. Similarly, the argument on territorial jurisdiction is not acceptable as Section 60 of the Code provides that the territorial jurisdiction e decided according to the location of the registered office of the Respondent. The applicant has also cured the defect of not enclosing the bank certificate by filing the necessary bank certificate under Section 9(3)(c) of the Code. The Applicant has established clearly that there exists debt and default on the part of the Respondent. The Respondent has not raised any dispute prior to the issuing of the notice under Section 8 of the Code by the Applicant. Application allowed - moratorium declared. Issues:Application for corporate insolvency resolution process under Section 9 of the Insolvency and Bankruptcy Code, 2016; Dispute over outstanding dues and default in payment; Territorial jurisdiction as per Memorandum of Understanding; Compliance with mandatory requirements for filing insolvency application; Discrepancies in invoices and services provided; Validity of arbitration clause in the MOU; Establishment of debt and default by the Respondent; Imposition of moratorium under Section 14 of the Code; Appointment of interim resolution professional.Analysis:The Applicant filed an application seeking to initiate the corporate insolvency resolution process of the Respondent for defaulting on dues amounting to Rs. 17,47,436. The Applicant provided services as per the Memorandum of Understanding (MoU) and raised several invoices, some of which were partially paid by the Respondent. The Respondent contested the application citing territorial jurisdiction, lack of bank certificate, and discrepancies in services provided. The Respondent claimed that expenses were to be shared, and the Applicant did not adhere to the MoU terms. The Tribunal ruled that the Code prevails over the arbitration clause and territorial jurisdiction is based on the Respondent's registered office location. The Applicant rectified the bank certificate issue. The Tribunal found debt and default by the Respondent, noting no prior dispute raised. Consequently, the Tribunal decided to initiate the corporate insolvency resolution process.The Tribunal imposed a moratorium under Section 14 of the Code, prohibiting suits, asset transfers, security enforcement, and property recovery against the Respondent. Essential supplies to the Respondent were protected during the moratorium. An interim resolution professional (IRP) was appointed to oversee the resolution process. The Applicant was directed to deposit funds for immediate expenses, to be reimbursed as part of the resolution costs. The IRP was instructed to report back within 30 days, with the case scheduled for further updates on a specified date.This detailed analysis covers the issues of insolvency application, dispute resolution, compliance, jurisdiction, invoice discrepancies, debt establishment, moratorium imposition, IRP appointment, and procedural steps taken by the Tribunal in this case.