Adjudication in favor of operational creditor under Insolvency and Bankruptcy Code

The adjudicating authority found in favor of the petitioner, an operational creditor, in a case under Section 9 of the Insolvency and Bankruptcy Code, 2016. The respondent, a corporate debtor, failed to dispute the operational debt exceeding Rs. 1.00 lac. The authority determined the debt's existence, due status, and absence of dispute, appointing an interim resolution professional and declaring a moratorium. The moratorium prevented actions against the debtor, initiating the insolvency resolution process until completion or further orders. The petition was admitted, and the order communicated to relevant parties and the interim professional.

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Issues:
Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 for operational debt exceeding Rs. 1.00 lac.

Analysis:
The petitioner, an operational creditor engaged in the manufacture of paper products, filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the respondent, a corporate debtor, for non-payment of operational debt. The operational creditor supplied chemicals to the corporate debtor for the manufacture of paper products as per their arrangement. Despite the delivery of products and issuance of invoices, the corporate debtor failed to make the payment within the credit period, leading the operational creditor to issue a demand notice under section 8 of the IB Code. The total outstanding debt as of September 26, 2019, was Rs. 4,79,174. The respondent made a partial payment of Rs. 50,000, which pertained to prior invoices. The petitioner submitted various documents to support the claim, including purchase orders, invoices, consignment notes, ledger, demand notice, and affidavits.

Upon examination, it was found that the respondent did not raise any dispute regarding the operational debt. The adjudicating authority had to proceed with the matter in the absence of the respondent since no appearance or reply was made. The authority had to determine the existence of operational debt exceeding Rs. 1.00 lac, the due and payable status of the debt, and the absence of a dispute between the parties. The legislative guide on Insolvency Law of United Nations Commission on International Trade Law was referenced to ascertain the legitimacy of the debt and the absence of a dispute or set off.

Based on the facts and circumstances presented, the adjudicating authority concluded that the operational debt was due to the applicant, who qualified as an Operational Creditor under the Code. The authority appointed an interim resolution professional and declared a moratorium to initiate the insolvency resolution process. The moratorium prohibited various actions against the corporate debtor, including suits, asset transfers, recovery of property, and termination of essential services. The order of moratorium was to remain in effect until the completion of the corporate insolvency resolution process or until further orders were issued. The petition was admitted, and the communication of the order was directed to the involved parties and the interim insolvency resolution professional.

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