2020 (6) TMI 795 - Tri - Insolvency and Bankruptcy

Tribunal admits petition for Corporate Insolvency Resolution Process

The tribunal admitted the petition for the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, as the operational ... Existence of operational debt - occurrence of default - limitation for filing a petition under Section 9 of the Insolvency and Bankruptcy Code - pre existing dispute under Section 8(2) of the Insolvency and Bankruptcy Code - admission of petition and initiation of Corporate Insolvency Resolution Process (CIRP) - appointment of Interim Resolution Professional and imposition of moratorium under the Insolvency and Bankruptcy CodeExistence of operational debt - occurrence of default - limitation for filing a petition under Section 9 of the Insolvency and Bankruptcy Code - Existence of operational debt above the monetary threshold, date of default, and whether the petition was filed within limitation. - HELD THAT: - The Adjudicating Authority examined the invoices, bank statements and pleadings and recorded that invoices were raised for supplies between 09.10.2017 and 31.12.2017 and that the date of first default was 19.04.2018. On the material before it the Authority was satisfied that an operational debt in excess of one lakh rupees existed, that the debt was due and that default occurred on 19.04.2018. Applying the date of default, the petition filed on 05.07.2018 was held to be within the limitation period for initiating proceedings under Section 9 of the Code. These findings are founded on the documentary material and chronology placed on record and are recorded as determinative facts for admission of the petition. [Paras 21, 22]Operational debt in excess of one lakh rupees existed, default occurred on 19.04.2018, and the petition filed on 05.07.2018 was within limitation.Pre existing dispute under Section 8(2) of the Insolvency and Bankruptcy Code - Whether a pre existing dispute regarding the operational debt existed prior to service of the demand notice. - HELD THAT: - The Corporate Debtor pleaded various objections including alleged defects in the authority of the petitioning company and a purported earlier acknowledgment/confirmation dated 01.01.2018. The Authority considered the pleadings, the petitioner's rebuttal evidence (including affidavits and documents challenging signatures) and other material on record and found that existence of a dispute prior to the demand notice was not established. The Authority treated the defences as not constituting a pre existing dispute sufficient to defeat the Section 9 petition and rejected the contention that the petition was founded on concocted or fraudulent documents for the purposes of denying admission. [Paras 11, 13, 18, 21, 22]No pre existing dispute was found to exist prior to the demand notice; the objections raised did not defeat the petition.Admission of petition and initiation of Corporate Insolvency Resolution Process (CIRP) - appointment of Interim Resolution Professional and imposition of moratorium under the Insolvency and Bankruptcy Code - Admission of the Section 9 petition, appointment of Interim Resolution Professional and declaration of moratorium. - HELD THAT: - Upon concluding that the operational debt existed, default had occurred and no pre existing dispute was established, the Adjudicating Authority admitted CP(IB) No.357/9/NCLT/AHM. Consequent to admission, the Authority directed the statutory moratorium to operate from the date of the order and appointed Mr. Rajeev Saxena as Interim Resolution Professional, directing him to perform the duties and filings required by the Code and to make the public announcement of moratorium. The Authority also directed communication of the order to relevant parties and the Registrar of Companies and recorded the IRP's obligations under the Code. [Paras 23, 24, 25, 26, 27]The petition was admitted; CIRP was initiated; moratorium imposed and Mr. Rajeev Saxena was appointed as Interim Resolution Professional.Final Conclusion: The Tribunal admitted the Section 9 petition on findings that an operational debt in excess of the statutory threshold existed, default occurred on 19.04.2018, no pre existing dispute was established, and consequently initiated CIRP, appointed an Interim Resolution Professional and declared the moratorium. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP)2. Existence and amount of operational debt3. Validity of the demand notice and board resolution4. Alleged pre-existing dispute5. Limitation period for filing the petitionDetailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP):The petition was filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of CIRP against the Corporate Debtor. The tribunal observed that the petition was filed within the limitation period, as the date of default was 19.04.2018, and the petition was filed on 05.07.2018.2. Existence and Amount of Operational Debt:The Operational Creditor claimed an amount of INR 90,81,732.60, comprising a principal amount of INR 87,25,079.00 and interest of INR 3,56,662.72. The invoices and delivery challans submitted by the Operational Creditor substantiated the supply of goods to the Corporate Debtor. The tribunal found that the existence of operational debt above INR 1 lakh was established, and the debt was due and defaulted on 19.04.2018.3. Validity of the Demand Notice and Board Resolution:The Corporate Debtor contested the validity of the demand notice and the board resolution authorizing the filing of the petition, alleging that the board meeting was not properly convened. The tribunal examined the affidavits and rebuttal documents provided by the Operational Creditor, which confirmed that the board meeting was duly held, and the resolution was valid. The tribunal dismissed the Corporate Debtor's objections regarding the defective letter of authority and the board resolution.4. Alleged Pre-existing Dispute:The Corporate Debtor argued that there was a pre-existing dispute regarding the supply of defective goods, supported by a confirmation letter dated 01.01.2016. The Operational Creditor refuted this claim, providing evidence that the signatures on the alleged letter did not match those of their representatives. The tribunal concluded that the Corporate Debtor's defense of a pre-existing dispute was not credible and was an attempt to avoid payment.5. Limitation Period for Filing the Petition:The tribunal confirmed that the petition was filed within the limitation period. The date of default was 19.04.2018, and the petition was filed on 05.07.2018, well within the prescribed time frame.Order:The tribunal admitted the petition, finding that the operational debt was above INR 1 lakh, the debt was due, and the default had occurred on 19.04.2018. There was no existence of a dispute prior to the notice issued by the Operational Creditor. Consequently, the tribunal declared a moratorium as per Sections 13 and 14 of the Insolvency and Bankruptcy Code and appointed Mr. Rajeev Saxena as the Interim Resolution Professional (IRP). The IRP was directed to make a public announcement of the moratorium and perform his duties as per the provisions of the Code. The tribunal also instructed all personnel connected with the Corporate Debtor to cooperate with the IRP.The petition CP (IB) No. 357/9/NCLT/AHM/2018 was admitted on 05.06.2020, and the tribunal issued directions for the communication of the order to relevant parties.