2018 (7) TMI 72 - Tri - Insolvency and Bankruptcy

Tribunal admits CIRP application against Corporate Debtor, appoints Interim Resolution Professional.

M/s. Topsgrup Services Ltd. Versus BLS IT-Services Pvt. Ltd.

M/s. Topsgrup Services Ltd. Versus BLS IT-Services Pvt. Ltd. - TMI Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP)2. Existence of Operational Debt and Default3. Dispute regarding the Debt4. Validity of the Agreement and Penalties5. Breach of Contract and Withdrawal of Services6. Appointment of Interim Resolution Professional (IRP)7. Moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC)Issue-wise Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP):The Operational Creditor, M/s. Topsgrup Services Ltd., filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, to initiate CIRP against the Corporate Debtor, M/s. BLS IT-Services Pvt. Limited. The application was complete, and the Operational Creditor sought to claim outstanding dues from the Corporate Debtor.2. Existence of Operational Debt and Default:The Operational Creditor issued invoices for services rendered from May 2017 to September 2017, amounting to Rs. 1,76,03,022/-. The invoices were acknowledged by the Corporate Debtor, and the debt was admitted in their reply to the notice. The Corporate Debtor cited delays in payments by the Punjab Government as the reason for non-payment.3. Dispute regarding the Debt:The Corporate Debtor denied the existence of any operational debt due and payable, citing disputes under Section 5(6) of the IBC. They argued that penalties were levied on the Operational Creditor for non-availability of guards and non-compliance with labor laws. However, the Tribunal noted that no clear communication of the dispute was made to the applicant, and no arbitration or legal proceedings were pending.4. Validity of the Agreement and Penalties:The Corporate Debtor relied on an unexecuted and incomplete agreement to impose penalties on the Operational Creditor. The Tribunal found that no cause of action could arise from an unexecuted agreement, and the handwritten calculations over the invoices appeared to be an afterthought. The Corporate Debtor did not issue any debit notes for the alleged deductions.5. Breach of Contract and Withdrawal of Services:The Corporate Debtor terminated the contract on 13.09.2017, and the Operational Creditor withdrew its services during the notice period. The Tribunal noted that there was no provision in the purchase order for a notice period before termination of services. The Operational Creditor rendered services till the end of September 2017, as instructed by the Corporate Debtor.6. Appointment of Interim Resolution Professional (IRP):The Tribunal appointed Mr. Vinod Kumar Chaurasia as the Interim Resolution Professional, as recommended by the Insolvency and Bankruptcy Board of India. The applicant was directed to pay Rs. 2 lakhs to the IRP to meet expenses for performing assigned functions.7. Moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC):The Tribunal issued a moratorium prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of assets, and recovery of property. The supply of essential goods or services to the Corporate Debtor was not to be terminated during the moratorium period.Conclusion:The Tribunal found that the application was complete, and the Operational Creditor was entitled to claim dues from the Corporate Debtor. The Corporate Debtor's reliance on an unexecuted agreement and handwritten deductions was not tenable. The present application was admitted, and a moratorium was issued in terms of Section 14 of the IBC.