2020 (3) TMI 161 - Tri - Insolvency and Bankruptcy

Company Petition under Insolvency Code leads to CIRP initiation for non-payment.

The Company Petition filed under section 9 of the Insolvency & Bankruptcy Code sought to initiate Corporate Insolvency Resolution Process against a ... Admission of application under section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of operational debt and default - service of demand notice in terms of section 8 of the IBC - absence of a pre existing dispute and acknowledgement of debt - initiation of Corporate Insolvency Resolution Process (CIRP) - moratorium under section 14 of the IBC - appointment of Interim Resolution Professional by the Adjudicating AuthorityExistence of operational debt and default - service of demand notice in terms of section 8 of the IBC - absence of a pre existing dispute and acknowledgement of debt - Petition under section 9 of the IBC admitted on the ground that the Operational Creditor established existence of an unpaid operational debt and default, after serving a valid demand notice and in the absence of any dispute. - HELD THAT: - The Tribunal found that the Operational Creditor raised invoices between 11.06.2016 and 22.08.2016 and that a principal outstanding of Rs. 6,97,915/- remained unpaid, with date of default recorded as 10.10.2016. A demand notice in Form 3 was served on the Corporate Debtor and no reply disputing the debt was received. The Operational Creditor filed the requisite affidavit asserting non payment and absence of any dispute. The Corporate Debtor, through its counsel, acknowledged the liability and stated inability to pay and an intention not to contest the petition. Cheques tendered by the Corporate Debtor and dishonoured further evidenced acknowledgement of the debt. On this material, the Tribunal concluded that the petition was complete and the statutory test for admission under section 9 was satisfied. [Paras 8, 13, 14, 15, 17]The petition under section 9 is admitted and default is established, warranting initiation of CIRP.Initiation of Corporate Insolvency Resolution Process (CIRP) - moratorium under section 14 of the IBC - appointment of Interim Resolution Professional by the Adjudicating Authority - Consequential orders on admission: commencement of CIRP with moratorium, directions for public announcement, appointment process for IRP, and interim administrative directions. - HELD THAT: - Upon admitting the petition, the Tribunal ordered initiation of CIRP and directed imposition of the moratorium in the terms of section 14, restraining institution or continuation of suits, transfer or disposal of assets, enforcement of security interests and recovery of property. The Tribunal directed immediate public announcement as prescribed by the Regulations and observed that, since no IRP was proposed by the Operational Creditor, the IRP would be appointed by the Adjudicating Authority by separate order; the IRP/RP fees and functions were to comply with applicable Regulations and the IBBI directions. The Corporate Debtor's management vests in the IRP during CIRP and officers were directed to cooperate. The Operational Creditor was directed to deposit an amount to meet public notice expenses and the Registry was directed to communicate the order and to inform the Registrar of Companies for updating records. [Paras 17, 18, 19]CIRP ordered; moratorium imposed; public announcement, IRP appointment by the Adjudicating Authority, deposit for notice expenses and related administrative directions issued.Final Conclusion: The Tribunal admitted the section 9 petition on the finding of established operational debt and default, directed initiation of CIRP against the Corporate Debtor, imposed the statutory moratorium, and issued ancillary directions including public announcement, appointment of the IRP by the Adjudicating Authority, and administrative compliances. Issues:- Company petition filed under section 9 of the Insolvency & Bankruptcy Code, 2016 (IBC) seeking Corporate Insolvency Resolution Process (CIRP) against a private company for non-payment.- Existence of debt and default by the corporate debtor.- Acknowledgment of debt by the corporate debtor.- Admission of the petition and initiation of CIRP.- Moratorium under section 14 of the IBC.- Appointment of Interim Resolution Professional (IRP).- Management of the corporate debtor during the CIRP.- Deposit by the operational creditor for expenses.- Communication of the order to relevant parties.Company Petition under IBC:The case involved a Company Petition filed under section 9 of the IBC seeking to initiate Corporate Insolvency Resolution Process against a private company for non-payment of a significant sum. The Operational Creditor, a proprietorship concern, claimed that the Corporate Debtor failed to make payments as per invoices, leading to a total debt of Rs. 9,37,993.00. The petition was supported by evidence such as invoices and bank statements, highlighting the default date as 10.10.2016.Existence of Debt and Default:The Operational Creditor provided detailed evidence of the debt, including invoices and cheques issued by the Corporate Debtor, which were dishonored. The Corporate Debtor acknowledged the liability but expressed inability to make the payment. The Tribunal found that there was no pre-existing dispute regarding the unpaid operational debt, establishing the debt and default clearly.Acknowledgment of Debt:The Corporate Debtor's acknowledgment of the debt was evident from the cheques issued for a partial amount of the outstanding dues. The Corporate Debtor did not contest the petition, further confirming the acknowledgment of the liability towards the Operational Creditor.Admission of the Petition and Initiation of CIRP:After hearing both sides and reviewing the records, the Tribunal found the petition to be complete and in compliance with the law. The default amount exceeded the minimum stipulated under the IBC, leading to the admission of the petition and the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor.Moratorium and Related Orders:The Tribunal ordered a moratorium under section 14 of the IBC, affecting various actions related to the Corporate Debtor's assets and legal proceedings. Essential services to the Corporate Debtor were to continue during the moratorium, with specific provisions outlined by the Central Government. The moratorium was to remain in effect until the completion of CIRP or other specified events.Appointment of Interim Resolution Professional (IRP):As the Operational Creditor did not propose an IRP, the Tribunal ordered the appointment of an IRP compliant with the relevant regulations. The IRP was tasked with managing the affairs of the Corporate Debtor during the CIRP period, with specific responsibilities outlined by the IBC.Deposit for Expenses and Communication of Orders:The Operational Creditor was directed to deposit a sum for expenses related to public notices and claims, subject to approval by the Committee of Creditors. The Tribunal also ordered the immediate communication of the order to all relevant parties and authorities, ensuring compliance and necessary updates.This detailed analysis of the judgment highlights the key legal aspects and decisions made by the Tribunal in the case, ensuring a comprehensive understanding of the issues involved and the resulting orders.