2020 (4) TMI 863 - Tri - Insolvency and Bankruptcy

Tribunal Admits Company Petition for Payment Default: CIRP Initiated

The National Company Law Tribunal, Mumbai Bench, admitted the Company Petition filed by an Operational Creditor under section 9 of the Insolvency & ... Admission of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - default of operational debt - consent terms and breach - demand notice under section 8 of the IBC - moratorium under section 14 of the IBC - appointment of Interim Resolution Professional - management vesting with IRP under section 17 of the IBC - public announcement of Corporate Insolvency Resolution ProcessAdmission of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - default of operational debt - demand notice under section 8 of the IBC - Operational Creditor's petition under section 9 is admitted on the ground of established default of a debt due and payable. - HELD THAT: - The Tribunal found that invoices were issued for supply of goods and that the date of default is recorded. A Demand Notice in Form 3 was served and remained unanswered. The application complied with statutory requirements and the default exceeded the statutory monetary threshold. In the absence of any reply or representation by the Corporate Debtor and on the material placed on record, the Tribunal concluded that the statutory preconditions for admission under section 9 were satisfied and there was no reason to deny admission. [Paras 3, 5, 6, 8, 13]Petition under section 9 admitted and CIRP ordered to be initiated against the Corporate Debtor.Consent terms and breach - default of operational debt - Corporate Debtor had earlier admitted liability by Consent Terms and subsequently breached those terms leading to fresh default. - HELD THAT: - The Tribunal recorded that in prior proceedings the Corporate Debtor had admitted debt and entered into Consent Terms providing for payment in instalments. The Corporate Debtor made only the first instalment and failed to pay the balance, thereby violating the Consent Terms. This admission and subsequent non compliance formed part of the material establishing default in the present petition. [Paras 7, 9, 10, 11, 12]The earlier admission and breach of Consent Terms corroborate the existence of default and support admission of the present petition.Moratorium under section 14 of the IBC - A moratorium under section 14 is imposed with the scope and duration as set out in the order. - HELD THAT: - On admission of the petition and initiation of CIRP, the Tribunal directed the statutory moratorium to operate from the date of the order until completion of CIRP or until approval of a resolution plan or order for liquidation. The moratorium covers institution or continuation of suits, transfer or disposal of assets, enforcement of security interests, and recovery of property occupied by the Corporate Debtor, subject to the statutory exceptions. [Paras 15]Statutory moratorium declared as part of the admission order.Appointment of Interim Resolution Professional - management vesting with IRP under section 17 of the IBC - public announcement of Corporate Insolvency Resolution Process - An Interim Resolution Professional (IRP) is appointed, public announcement of CIRP is directed, and management of the Corporate Debtor vests in the IRP. - HELD THAT: - The Operational Creditor proposed a registered insolvency professional who filed the requisite Form 2 and certificate of registration. The Tribunal appointed the proposed professional as IRP, directed immediate public announcement of the CIRP as per the regulations, and stated that the IRP shall perform functions under the relevant provisions of the IBC. The order also records that management shall vest in the IRP and officers of the Corporate Debtor must furnish documents and information within one week. [Paras 14, 15]Mr. Uday Shreeram Sakrikar appointed as IRP; public announcement directed; management vested in the IRP.Operational creditor's deposit towards CIRP expenses - Operational Creditor directed to deposit an amount to meet initial CIRP expenses with the IRP. - HELD THAT: - As part of directions incidental to initiation of CIRP, the Tribunal ordered the Operational Creditor to deposit a specified sum with the IRP to meet expenses arising from issuing public notice and inviting claims. The Tribunal recorded that such expenses will be subject to approval by the Committee of Creditors. [Paras 15]Operational Creditor to deposit the directed sum with the IRP for CIRP expenses.Final Conclusion: The Tribunal admitted the Section 9 petition on the basis of established default, recorded prior admission and breach of Consent Terms, initiated CIRP, imposed the statutory moratorium, appointed the proposed Interim Resolution Professional who will assume management, directed public announcement of the CIRP and required the Operational Creditor to deposit the specified amount for CIRP expenses. Issues:1. Initiation of Corporate Insolvency Resolution Process under section 9 of the Insolvency & Bankruptcy Code, 2016.2. Jurisdiction of the National Company Law Tribunal, Mumbai Bench.3. Default in payment by the Corporate Debtor.4. Admission of liability by the Corporate Debtor in previous proceedings.5. Violation of Consent Terms by the Corporate Debtor.6. Completeness of the application by the Operational Creditor.7. Appointment of Interim Resolution Professional.8. Moratorium under section 14 of the IBC.9. Management of the Corporate Debtor during the CIRP period.Analysis:1. The judgment pertains to a Company Petition filed under section 9 of the Insolvency & Bankruptcy Code, 2016 by an Operational Creditor seeking to initiate Corporate Insolvency Resolution Process (CIRP) against a Corporate Debtor for defaulting on payment obligations.2. The Corporate Debtor, a public company, was incorporated under the Companies Act, 1956, and the Tribunal established its jurisdiction to hear the petition based on the Corporate Debtor's registration details.3. The petition was filed due to the Corporate Debtor's failure to make payments totaling a significant amount, leading to the Operational Creditor's claim for initiation of CIRP.4. The Corporate Debtor had previously admitted to the debt in an earlier proceeding, but failed to fulfill the agreed payment terms, indicating a breach of the Consent Terms.5. The Operational Creditor's application was found to be complete and in compliance with the law, establishing the Corporate Debtor's default and justifying the admission of the petition.6. The Tribunal admitted the petition, ordered the initiation of CIRP against the Corporate Debtor, and appointed an Interim Resolution Professional to oversee the resolution process.7. A moratorium was imposed under section 14 of the IBC, affecting various actions related to the Corporate Debtor's assets and legal proceedings.8. The management of the Corporate Debtor during the CIRP period was vested in the appointed Resolution Professional, with specific directions for compliance and reporting to relevant authorities.9. The judgment outlined detailed steps, including the deposit of funds by the Operational Creditor, communication of orders to involved parties, and updating of corporate records with regulatory authorities for transparency and compliance purposes.