2019 (10) TMI 416 - Tri - Insolvency and Bankruptcy

Tribunal admits application for Insolvency Resolution Process due to non-payment of license fee.

The Tribunal admitted the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, for triggering the Insolvency Resolution Process ... Operational debt - default and debt due and payable - admission under Section 9 of the Code - service of notice and ex parte hearing - appointment of Interim Insolvency Resolution Professional - public announcement and call for submission of claims - moratorium under Section 14 of the Code - initiation of corporate insolvency resolution processOperational debt - default and debt due and payable - admission under Section 9 of the Code - Existence of an operational debt and occurrence of default sufficient to admit the Section 9 application. - HELD THAT: - On the material on record, including the ledger maintained by the applicant, the Authority found that the corporate debtor owed licence fees to the operational creditor and that default had occurred. The Tribunal applied the statutory tests for an operational debt and for admission under Section 9 and concluded that the applicant established the existence of debt and default. No dispute was raised by the corporate debtor on the record to negate the claim, and the application was held complete for adjudication. [Paras 11, 12, 15]The Section 9 application was admitted on the ground that an operational debt existed and default had occurred.Service of notice and ex parte hearing - Validity of service of demand notice and entitlement to proceed ex parte in absence of representation by the corporate debtor. - HELD THAT: - The record showed service of notices through the Registry and by the petitioner on the corporate debtor. As no representation or response was received from the corporate debtor, the Authority proceeded to hear the matter ex parte and treated service as complete for the purposes of the Section 9 proceedings. [Paras 6, 8]Service was held to be complete and the matter was heard in the absence of the respondent.Appointment of Interim Insolvency Resolution Professional - public announcement and call for submission of claims - Appointment of the named Interim Insolvency Resolution Professional and direction to make the public announcement and call for claims. - HELD THAT: - The applicant proposed an Interim Insolvency Professional and the Authority, exercising its powers under the Code, appointed the person proposed to act as the Interim Insolvency Professional. The Authority directed the Interim Resolution Professional to make the public announcement of initiation of the corporate insolvency resolution process and to call for submission of claims as required by the statutory scheme. [Paras 13, 14]Ms. Anjali Choksi was appointed as Interim Insolvency Resolution Professional and directed to make the public announcement and call for submission of claims.Moratorium under Section 14 of the Code - initiation of corporate insolvency resolution process - Declaration of moratorium consequent to admission of the insolvency application and scope/duration of the moratorium. - HELD THAT: - Upon admitting the Section 9 application and appointing the Interim Resolution Professional, the Authority exercised its discretion to declare a moratorium under the Code. The moratorium prohibits institution or continuation of suits or proceedings against the corporate debtor, transfer or disposal of its assets, enforcement of security interests and recovery of property occupied by the corporate debtor, and is to have effect from receipt of an authenticated copy of the order until completion of the corporate insolvency resolution process or earlier orders approving a resolution plan or directing liquidation. [Paras 14, 16, 18]A moratorium was declared in terms of the Code with directions regarding its scope and duration.Final Conclusion: The Tribunal admitted the Section 9 application, held that an operational debt and default existed, validated service and proceeded ex parte, appointed the proposed Interim Insolvency Resolution Professional, directed the public announcement and call for claims, declared the moratorium, and disposed of the petition accordingly with no order as to costs. Issues involved:Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for triggering Insolvency Resolution Process against a corporate debtor due to non-payment of license fee.Detailed Analysis:Issue 1: Application under Section 9 of the Insolvency and Bankruptcy CodeThe applicant filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 to initiate the Insolvency Resolution Process against the corporate debtor, M/s. Steps Dumask Waste Processing Services Private Limited, for non-payment of the license fee. The applicant, an operational creditor, had a Leave and License Agreement with the corporate debtor, under which the corporate debtor was obligated to pay a monthly license fee of Rs. 80,000. The debt of Rs. 16,49,600 became due and payable by the corporate debtor to the operational creditor.Issue 2: Existence of Operational DebtThe Tribunal examined whether there was an operational debt exceeding Rs. 1.00 lac, whether the debt was due and payable, and whether there was a dispute between the parties. The Tribunal referred to the Legislative Guide on Insolvency Law of the United Nations Commission on International Trade Law to determine if the debt was subject to a legitimate dispute or set off. The Tribunal found that the operational debt was due to the applicant, as evidenced by the ledger provided, and no dispute was raised by the respondent.Issue 3: Appointment of Interim Insolvency ProfessionalThe Tribunal appointed Ms. Anjali Choksi as the Interim Insolvency Professional to act under Section 13(1)(c) of the Code. It directed the professional to declare a moratorium, make a public announcement of the initiation of corporate insolvency resolution, and call for submission of claims as required by the Code.Issue 4: Declaration of MoratoriumThe Tribunal admitted the application and declared a moratorium, prohibiting various actions against the corporate debtor, including instituting suits, transferring assets, enforcing security interests, and recovering property. It directed that the supply of goods and essential services to the corporate debtor should not be terminated during the moratorium period, except for transactions notified by the Central Government.ConclusionThe Tribunal admitted the petition, declared a moratorium, and directed the Interim Insolvency Professional to proceed with the Insolvency Resolution Process. The order of moratorium would remain in effect until the completion of the corporate insolvency resolution process or until a resolution plan was approved or liquidation ordered. The petition was disposed of with no order as to costs, and the order was communicated to all relevant parties.