2019 (10) TMI 415 - Tri - Insolvency and Bankruptcy

Admission of Insolvency Application under Section 9 | Interim Professional Appointed | Moratorium Declared

The application under Section 9 of the Insolvency and Bankruptcy Code was admitted by the adjudicating authority, initiating the insolvency resolution ... Operational debt - default - existence of a dispute / pendency of suit or arbitration prior to demand notice - admission of application under Section 9 - appointment of Interim Resolution Professional - public announcement and submission of claims - moratorium under Section 14 - initiation of corporate insolvency resolution processOperational debt - default - existence of a dispute / pendency of suit or arbitration prior to demand notice - Operational debt was due and payable, default had occurred, and no pre-existing dispute or proceeding barred admission of the Section 9 application. - HELD THAT: - On the material on record the invoices for services rendered in 2017-2018 were placed before the Authority and the respondent admitted receipt of the invoices and liability. Service of the demand notice was proved. The respondent did not demonstrate any pre-existing dispute or any suit or arbitration pending prior to receipt of the demand notice. In view of these facts, and having regard to the statutory tests applied under Section 9, the adjudicating authority found that an operational debt exists, default has occurred and there is no bar to admission on account of a legitimate dispute or prior proceedings. [Paras 9, 12]The Section 9 application was held maintainable on the ground that operational debt and default were established and no pre-existing dispute or proceeding existed.Completeness of Section 9 application - appointment of Interim Resolution Professional - The application was complete in all respects and an Interim Resolution Professional was appointed. - HELD THAT: - The Adjudicating Authority recorded that the petition was complete as filed and proceeded to appoint an interim resolution professional to manage the initial steps of the insolvency process. The appointment included directions to the appointed professional in relation to the functions which follow the admission of an application under the Code. [Paras 13, 14]Application declared complete and Shri Sunil Kumar Agarwal was appointed as Interim Resolution Professional.Public announcement and submission of claims - initiation of corporate insolvency resolution process - Directions were given for immediate public announcement and for calling submission of claims upon initiation of the corporate insolvency resolution process. - HELD THAT: - Relying on the statutory mandate that public announcement follows appointment of an interim resolution professional, the Authority directed the Insolvency Resolution Professional to make the public announcement and to call for submission of claims as required under the Code, so as to commence the process of inviting claims and managing the corporate insolvency resolution process. [Paras 15]IRP directed to make public announcement and call for submission of claims immediately.Admission of application under Section 9 - moratorium under Section 14 - The petition was admitted under Section 9 and a moratorium under Section 14 was declared from the date of receipt of authenticated copy of the order. - HELD THAT: - Having found that the statutory requirements for admission were satisfied, the Authority admitted the application and exercised its powers to declare the moratorium prescribed by Section 14, including prohibition of institution or continuation of suits, transfer or disposal of assets, enforcement of security interests and recovery of leased property, subject to statutory exceptions. The moratorium was ordered to operate from the date of receipt of the authenticated order until completion of the insolvency resolution process or further order. [Paras 16, 17, 19]Application admitted and moratorium under Section 14 declared to operate from receipt of authenticated copy of the order.Final Conclusion: The Tribunal admitted the Section 9 petition, appointed an Interim Resolution Professional, directed immediate public announcement and calling of claims, declared the moratorium under Section 14 and ordered initiation of the corporate insolvency resolution process; the petition is disposed of with no order as to costs. Issues:Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for Insolvency Resolution Process.Analysis:The applicant, an operational creditor, filed an application under Section 9 of the Insolvency and Bankruptcy Code, seeking to initiate the insolvency resolution process against the respondent, a corporate debtor. The applicant claimed outstanding dues of Rs. 10,57,662 from the respondent, supported by invoices and a demand notice. The respondent admitted the debt but cited financial constraints due to economic recession, requesting a year to settle the amount. The respondent also expressed efforts to revive the company within 12-14 months to clear debts. The adjudicating authority examined the evidence and found the operational debt due to the applicant. The respondent did not raise any dispute or pending proceedings regarding the debt. The application was found complete, and an interim insolvency professional was appointed.The adjudicating authority referred to the legislative guide on insolvency law and Supreme Court judgments to determine the legitimacy of the debt and absence of dispute. The authority found the operational debt established by the applicant, with no disputes raised by the respondent. The application was deemed complete, and an interim insolvency professional was appointed to proceed with the resolution process. The authority declared a moratorium, prohibiting legal actions against the corporate debtor and directing the insolvency professional to make a public announcement for claims submission. The moratorium was effective until the completion of the insolvency resolution process or liquidation, with provisions for essential services to continue for the corporate debtor. The petition was admitted, and the order communicated to all relevant parties.In conclusion, the application under Section 9 of the Insolvency and Bankruptcy Code was admitted by the adjudicating authority, initiating the insolvency resolution process for the corporate debtor. The authority appointed an interim insolvency professional and declared a moratorium to protect the corporate debtor's assets and facilitate the resolution process. The decision was based on the evidence provided by the applicant, the respondent's admission of debt, and the absence of disputes or pending proceedings.