2020 (3) TMI 163 - Tri - Insolvency and Bankruptcy

Adjudication: Corporate Insolvency Process Initiated, Moratorium Imposed

The Adjudicating Authority admitted the Company Petition under the Insolvency & Bankruptcy Code, 2016, ordering the initiation of Corporate Insolvency ... Admission of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - Corporate debtor in default of operational debt - Bona fide dispute on operational debt - Doctrine of indoor management - Moratorium under section 14 of the Insolvency & Bankruptcy Code, 2016 - Appointment of Interim Resolution ProfessionalJurisdiction of Adjudicating Authority - This Bench has jurisdiction to adjudicate the petition. - HELD THAT: - The Corporate Debtor is a company incorporated with the Registrar of Companies, Maharashtra, Mumbai and its registered office falls within the territorial jurisdiction of this Bench. On that basis the Adjudicating Authority holds it has jurisdiction to deal with the petition. [Paras 2]Jurisdictional competence of this Bench to hear the petition established.Corporate debtor in default of operational debt - Admission of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - The petition under section 9 is complete and admission is warranted as the Corporate Debtor is in default of an operational debt exceeding the statutory minimum. - HELD THAT: - The Operational Creditor furnished invoices, ledger accounts and a demand notice; the Corporate Debtor's own account ledgers show balances aggregating to the claimed principal amount. The Operational Creditor filed the requisite certificate under section 9(3)(c) and an affidavit under section 9(3)(b) that no dispute notice had been given. Having considered the materials and submissions, the Adjudicating Authority found that the petition complies with statutory requirements and that default stands established. Consequently, admission and initiation of CIRP was ordered. [Paras 3, 5, 8, 9, 18]The section 9 petition is admitted and CIRP is initiated against the Corporate Debtor.Bona fide dispute on operational debt - Doctrine of indoor management - The defence of collusion and overpricing raised by the Corporate Debtor does not constitute a bona fide dispute sufficient to thwart admission under section 9. - HELD THAT: - The Corporate Debtor alleged collusion between one of its employees and the Operational Creditor leading to alleged overpricing. The Adjudicating Authority observed there was no reply to the demand notice, no pleading as to when any fraud was discovered, and that the Corporate Debtor admitted receipt and utilisation of the supplies and the ledger balances. The bench held that such internal contentions about collusion are matters that may be pursued by the Corporate Debtor against its employee(s) and fall outside the scope of IBC; they amount to challenges under the doctrine of indoor management rather than a cognizable, pre-existing legal dispute affecting the operational debt. Therefore the defence was rejected for the purpose of section 9 admission. [Paras 13, 15, 16, 17, 18]Allegation of collusion/overpricing does not constitute a bona fide dispute preventing admission under section 9; petition not defeated on that ground.Moratorium under section 14 of the Insolvency & Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional - Upon admission the statutory moratorium is imposed and the IRP will be appointed by the Adjudicating Authority; ancillary directions regarding public announcement, vesting of management and deposit for expenses were issued. - HELD THAT: - Following admission, the Adjudicating Authority ordered the moratorium contemplated by section 14 to take effect from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. Directions were given that essential supplies not be interrupted, that public announcement be made as prescribed, that management vests in the IRP during CIRP, and that the Operational Creditor deposit a specified sum with the IRP to meet public notice expenses. As no IRP was proposed by the Operational Creditor, the Adjudicating Authority will appoint the IRP by a separate order and the IRP's fees and functions shall comply with applicable regulations. [Paras 18, 20]Statutory moratorium imposed; IRP to be appointed by the Adjudicating Authority and ancillary directions issued to give effect to CIRP.Final Conclusion: The Adjudicating Authority found the section 9 petition complete and the Corporate Debtor in default; the defence of alleged collusion was held not to be a bona fide dispute preventing admission. The petition was admitted, CIRP initiated, moratorium imposed and directions given for public announcement, vesting of management in the IRP (to be appointed by the Authority) and payment by the Operational Creditor towards notice expenses. Issues Involved:- Company Petition under section 9 of the Insolvency & Bankruptcy Code, 2016 (IBC) for Corporate Insolvency Resolution Process (CIRP) against a Private Limited Company.- Allegation of default in payment by the Corporate Debtor.- Dispute regarding the validity of the claim raised by the Operational Creditor.- Allegations of collusion and fraudulent activities between the Operational Creditor and an employee of the Corporate Debtor.- Jurisdiction of the Adjudicating Authority over the matter.- Compliance with statutory requirements for initiating CIRP.Analysis of Judgment:1. Company Petition under IBC:The Company Petition was filed by the Operational Creditor seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for defaulting on a payment of a specific amount. The Operational Creditor provided detailed evidence of the debt owed by the Corporate Debtor, including invoices and ledger accounts, to support the claim.2. Allegation of Default:The Operational Creditor alleged that the Corporate Debtor failed to make a payment of a substantial amount, including the principal sum and interest. The Corporate Debtor did not contest the fact that the services were availed, but raised concerns about the pricing and collusion with one of its employees.3. Validity of Claim and Dispute:The Corporate Debtor disputed the validity of the claim, alleging collusion between the Operational Creditor and its employee to inflate prices. However, the Adjudicating Authority found that even if such collusion existed, it did not invalidate the debt owed by the Corporate Debtor to the Operational Creditor.4. Jurisdiction and Compliance:The judgment confirmed the jurisdiction of the Adjudicating Authority to hear the petition based on the location and nature of the parties involved. It also highlighted the compliance of the Operational Creditor with the statutory requirements for initiating CIRP, including serving a Demand Notice and submitting necessary certificates.5. Order and Moratorium:The Adjudicating Authority admitted the petition, ordered the initiation of CIRP against the Corporate Debtor, and imposed a moratorium under section 14 of the IBC. The moratorium included restrictions on legal actions against the Corporate Debtor and the appointment of an Interim Resolution Professional (IRP).6. Further Directions:The judgment directed the appointment of an IRP, outlined the responsibilities and powers of the IRP during the CIRP period, and mandated the deposit of funds by the Operational Creditor for expenses related to the process. The Registry was instructed to communicate the order to relevant parties promptly.In conclusion, the judgment upheld the petition by the Operational Creditor, acknowledging the default by the Corporate Debtor and ordering the commencement of CIRP, while addressing jurisdictional issues and ensuring compliance with statutory requirements.