Tribunal admits petition for Corporate Insolvency Resolution Process, appoints Interim Resolution Professional

The Tribunal admitted the petition to initiate Corporate Insolvency Resolution Process against the Corporate Debtor, finding the Memorandum of Agreement valid. It dismissed the claim of a pre-existing dispute and determined the Corporate Debtor's financial insolvency. Mr. Kanekal Chandrashekhar was appointed as the Interim Resolution Professional, and a moratorium was declared. Progress reports were ordered, and cooperation from the Corporate Debtor's Board of Directors was mandated, with the next hearing scheduled for 18th May 2021.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Validity of Memorandum of Agreement (MoA)
3. Pre-existing Dispute
4. Financial Solvency of the Corporate Debtor
5. Appointment of Interim Resolution Professional (IRP)

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petition was filed under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, by the Operational Creditor to initiate CIRP against the Corporate Debtor for an outstanding amount of Rs. 6 Crore along with interest. The petition was supported by a resolution authorizing the Managing Partner to file the application. The Tribunal examined the petition and supporting documents, including the legal notices and replies exchanged between the parties.

2. Validity of Memorandum of Agreement (MoA):
The Operational Creditor claimed that an MoA dated 08.06.2015 was entered into, wherein the Corporate Debtor agreed to pay Rs. 6 Crore for development activities. The Corporate Debtor denied the existence of the MoA, alleging it was concocted. The Tribunal found the MoA to be genuine and valid, bearing the seal and signature of the Corporate Debtor’s Managing Director. The Tribunal emphasized that the MoA explicitly acknowledged the debt and outlined the payment terms, including the issuance of postdated cheques.

3. Pre-existing Dispute:
The Corporate Debtor argued the existence of a pre-existing dispute, citing legal notices related to indemnity issues and pending litigations. The Tribunal noted that these disputes were unrelated to the debt under the MoA. The Tribunal concluded that the dispute regarding the Rs. 6 Crore arose only after the subsequent buyer withheld payments, and there was no genuine pre-existing dispute regarding the debt.

4. Financial Solvency of the Corporate Debtor:
The Tribunal reviewed the financial statements of the Corporate Debtor, noting significant losses, negative reserves, and reduced cash equivalents. The Corporate Debtor’s inability to generate revenue and pay debts was evident. The Tribunal concluded that the Corporate Debtor was not solvent and was unable to continue its business operations effectively.

5. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Kanekal Chandrashekhar as the IRP, as the Petitioner did not suggest any name. The IRP’s consent and qualifications were verified, and he was directed to perform his duties as per the IBC and related regulations. The Tribunal declared a moratorium prohibiting suits, asset transfers, and recovery actions against the Corporate Debtor during the CIRP.

Conclusion:
The Tribunal admitted the petition for initiating CIRP against the Corporate Debtor, appointed an IRP, and declared a moratorium. The Tribunal directed the IRP to file progress reports and ensured cooperation from the Corporate Debtor’s Board of Directors and staff. The case was scheduled for a report on 18th May 2021.

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