2019 (4) TMI 1357 - Tri - Insolvency and Bankruptcy

Tribunal Admits Application for Corporate Insolvency Due to Operational Debt Default

The Tribunal admitted the application under section 9 of the Insolvency and Bankruptcy Code, 2016, for Corporate Insolvency process initiation against a ... Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of operational debt and default - absence of dispute and compliance with Section 9(3) - appointment of Interim Resolution Professional subject to consent and disclosures - moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016 - jurisdiction and maintainability of section 9 application - limitation and date of defaultExistence of operational debt and default - absence of dispute and compliance with Section 9(3) - The application under Section 9 was admitted on the ground that an operational debt was due and default was established and no valid dispute or payment had been shown by the Corporate Debtor. - HELD THAT: - The Tribunal found that the applicant produced a Brokerage Agreement and evidence of services rendered leading to an outstanding operational debt. The Corporate Debtor acknowledged liability in correspondence but failed to discharge the obligation. The applicant filed the affidavit required under Section 9(3) affirming non-receipt of the claimed amount and non-receipt of any notice of dispute. No reply or substantiated dispute was produced by the Corporate Debtor and the matter proceeded ex parte. On these facts the Tribunal concluded that the operational debt and default stood established and that the statutory prerequisites for admission under Section 9 were satisfied. [Paras 11, 12, 13, 14, 17]Application admitted under Section 9 as the operational debt and default were established and no dispute was shown.Jurisdiction and maintainability of section 9 application - limitation and date of default - The Tribunal held that it had jurisdiction to entertain the application and that the petition was within the period of limitation. - HELD THAT: - The Tribunal recorded that the registered office of the Corporate Debtor is situated within its territorial jurisdiction and therefore the application is maintainable before this Bench. It further noted the date of default as recorded in the pleadings and observed that the application was filed within the limitation period, rendering the claim not time barred. [Paras 15, 16]Tribunal has jurisdiction and the application is within limitation.Appointment of Interim Resolution Professional subject to consent and disclosures - An Interim Resolution Professional named by the applicant was appointed subject to filing of consent and disclosures and absence of pending disciplinary proceedings. - HELD THAT: - The applicant nominated an individual to act as Interim Resolution Professional. The Tribunal appointed the named person as IRP on the condition that there are no disciplinary proceedings pending against him, that he files specific consent in the prescribed Form 2, and makes the disclosures mandated by the relevant IBBI regulations within the time fixed by the order. The appointment was therefore conditional and dependent on the specified formalities being complied with. [Paras 18]Named IRP appointed subject to compliance with consent, disclosure requirements and absence of disciplinary proceedings.Moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016 - On admission, the corporate insolvency resolution process was ordered to commence and the statutory moratorium under Section 14(1) was declared. - HELD THAT: - Having admitted the Section 9 application, the Tribunal directed that consequences of admission under Section 9(5) follow, including the operation of the moratorium envisaged by Section 14(1). The order recorded that the prohibitions under the moratorium would apply and that relevant provisions of Sections 14(2) to 14(4) would be in force during the moratorium period, thereby staying specified recovery actions against the Corporate Debtor. [Paras 19]Moratorium under Section 14(1) declared consequent to admission of the application.Final Conclusion: The Section 9 application was admitted: the Tribunal found an undisputed operational debt and default, held the petition maintainable and within limitation, appointed the nominated Interim Resolution Professional subject to prescribed consents and disclosures, and directed that the statutory moratorium under Section 14(1) shall operate in consequence of admission. Issues:- Application under section 9 of Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency process initiation against a private limited company.- Dispute over outstanding dues under a Brokerage Agreement.- Failure of the Corporate Debtor to pay the operational debt leading to the initiation of insolvency proceedings.- Appointment of Interim Resolution Professional (IRP) and implications of moratorium under Section 14(1) of the Code.Analysis:1. The application was filed under section 9 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency process against the Corporate Debtor, a private limited company. The Applicant, a broker in real estate, entered into a Brokerage Agreement with the Corporate Debtor for revenue sharing, with the Corporate Debtor failing to renew the agreement after accruing an outstanding amount of Rs. 3,60,000.2. Despite several requests and a legal notice demanding payment, the Corporate Debtor admitted its liability but cited financial stress for non-payment. The Operational Creditor issued a demand notice under section 8 of the Code, which remained unanswered by the Corporate Debtor, leading to the filing of the present application under section 9 of the IBC, 2016.3. The Applicant affirmed the non-receipt of the outstanding amount and any notice of dispute from the Corporate Debtor, establishing the debt of Rs. 3,39,750 along with 18% interest. The Corporate Debtor's failure to respond or appear in the proceedings resulted in an ex-parte hearing, where the Tribunal found the application complete and admitted it.4. The Tribunal noted that the default was not time-barred, as the debt occurred post the agreement's tenure, and the application was within the limitation period. Consequently, the Tribunal admitted the application, appointing an Interim Resolution Professional (IRP) subject to certain conditions, and imposed a moratorium under Section 14(1) of the IBC, 2016, prohibiting certain actions by the Respondent during the moratorium period.5. The order of admission was communicated to the Applicant, Corporate Debtor, and the IRP, with a copy forwarded to the Insolvency and Bankruptcy Board of India for records. The implications of the moratorium under Sections 14(2) to 14(4) of the Code were highlighted, ensuring the due process following the initiation of insolvency proceedings.