Tribunal allows Insolvency Process against Corporate Debtor for unpaid debt

The Tribunal admitted the application under Section 9 of the Insolvency & Bankruptcy Code, 2016, allowing the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. The Operational Creditor's claim for outstanding debt was upheld as the Corporate Debtor failed to pay, leading to the declaration of a moratorium and appointment of an Interim Resolution Professional to oversee the resolution process. The Corporate Debtor's directors and management were directed to cooperate with the IRP, and the Registry was tasked with notifying all relevant parties of the order.

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Issues:
Admission of application under Section 9 of the Insolvency & Bankruptcy Code, 2016 - Prayer for initiating Corporate Insolvency Resolution Process, declaring moratorium, and appointing Interim Resolution Professional.

Analysis:
The Operational Creditor filed an application under Section 9 of the Insolvency & Bankruptcy Code, 2016 seeking admission to initiate Corporate Insolvency Resolution Process against the Corporate Debtor. The Operational Creditor claimed an outstanding amount against the Corporate Debtor, which the latter failed to pay. The relationship between the parties involved the supply of yarn by the Operational Creditor to the Corporate Debtor for converting into grey fabric on a job work basis. Disputes arose when the Corporate Debtor did not hand over the entire physical stocks of goods to the Operational Creditor, leading to the latter raising invoices for the shortfall quantity. The Corporate Debtor acknowledged the debt due to the Operational Creditor in email communications and failed to respond to demand notices sent regarding the unpaid operational debt.

The Operational Creditor fulfilled all legal requirements for admission of the application, including sending demand notices and filing necessary affidavits. The Tribunal found that the Corporate Debtor had defaulted in making payment of the outstanding debt claimed by the Operational Creditor. Consequently, the application was admitted, and the Corporate Insolvency Resolution Process was initiated. A moratorium was declared from the date of the order until the completion of the resolution process, prohibiting various actions against the Corporate Debtor. An Interim Resolution Professional (IRP) was appointed to manage the affairs of the Corporate Debtor, with directions to make a public announcement and call for creditor claims. The Directors and management associated with the Corporate Debtor were instructed to cooperate with the IRP. The Registry was tasked with communicating the order to all relevant parties, including the IRP, Operational Creditor, and Corporate Debtor.

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