2018 (4) TMI 1440 - Tri - Insolvency and Bankruptcy

Tribunal admits petition under IBC for Corporate Insolvency Resolution Process, declares moratorium.

The Tribunal admitted the petition filed by the Operational Creditor under Section 9 of the IBC, 2016, for initiating the Corporate Insolvency Resolution ... Corporate Insolvency Resolution Process - existence of dispute - Held that:- A corporate debtor is bound to accept the award as final in a proceedings initiated against it. Pendency of an arbitration proceeding amounts to ‘existence of a dispute’ under the provisions of the IB Code. As none of the contentions taken by the respondent in its reply seen sustainable under law. Thus, it is clear that petition filed by the operational creditor under section 9 of the Insolvency & Bankruptcy Code, 2016 deserves to be admitted Issues Involved:1. Default in payment by the Corporate Debtor.2. Existence and finality of the Arbitral Award.3. Compliance with the provisions of the Insolvency and Bankruptcy Code (IBC), 2016.4. Pendency of appeal under Section 37 of the Arbitration and Conciliation Act, 1996.5. Definition and scope of 'Operational Debt' under IBC, 2016.Issue-wise Detailed Analysis:1. Default in Payment by the Corporate Debtor:The Operational Creditor, M/s. Orissa Stevedores Limited, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, claiming a default in payment of Rs. 13,06,89,315 by the Corporate Debtor, M/s. The Orissa Minerals Development Company Ltd. The debt arose from a final arbitral award dated 20.05.2015, which was in favor of the Operational Creditor. Despite the issuance of a demand notice dated 12.09.2017, the Corporate Debtor failed to make the payment or raise any dispute within the stipulated time.2. Existence and Finality of the Arbitral Award:The arbitral award dated 20.05.2015 awarded various sums to the Operational Creditor, which the Corporate Debtor contested. The Corporate Debtor's appeal under Section 34 of the Arbitration and Conciliation Act, 1996, was dismissed by the District Judge on 17.08.2016. The Operational Creditor argued that the default occurred when the arbitral award was not honored and further when the demand notice was ignored. The Corporate Debtor's failure to pay the awarded amount was evident from the bank certificate provided by the Operational Creditor.3. Compliance with the Provisions of the Insolvency and Bankruptcy Code (IBC), 2016:The Operational Creditor complied with the provisions of Section 9 of the IBC, 2016, by issuing a demand notice and providing the necessary documents, including the arbitral award and bank certificate. The Corporate Debtor did not respond to the demand notice within the required timeframe, nor did it make the payment, thereby fulfilling the conditions for initiating the Corporate Insolvency Resolution Process (CIRP).4. Pendency of Appeal under Section 37 of the Arbitration and Conciliation Act, 1996:The Corporate Debtor argued that an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, was pending before the High Court at Calcutta, which should bar the initiation of CIRP. However, the Tribunal held that the pendency of an appeal does not amount to the existence of a dispute under Section 8 of the IBC. The appeal was filed after the receipt of the demand notice, and thus, it did not affect the proceedings under the IBC.5. Definition and Scope of 'Operational Debt' under IBC, 2016:The Tribunal examined the definition of 'Operational Debt' under Sections 5(20) and 5(21) of the IBC, 2016. It concluded that the amount claimed by the Operational Creditor for services rendered falls within the definition of 'Operational Debt.' The Tribunal referenced the case of Vinod Awasthy v. AMR Infrastructures Ltd., which distinguished between 'financial debt' and 'operational debt,' affirming that the claim for services rendered qualifies as operational debt.Conclusion:The Tribunal admitted the petition filed by the Operational Creditor under Section 9 of the IBC, 2016, for initiating the Corporate Insolvency Resolution Process against the Corporate Debtor. The moratorium was declared as per Section 14 of the IBC, 2016, prohibiting various actions against the Corporate Debtor. An Interim Resolution Professional was appointed to carry out the necessary proceedings. The Tribunal directed the Registry to communicate the order to the parties involved and scheduled the matter for a progress report.