Tribunal Initiates CIRP under Insolvency Code: Moratorium Declared, Interim Professional Appointed

The Tribunal admitted the petition under Section 9 of the Insolvency & Bankruptcy Code, 2016, and initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. A moratorium was declared as per Section 14 of the Code, and an Interim Resolution Professional was appointed. The Tribunal ordered the public announcement of the CIRP initiation, and the Registrar of Companies was notified to update the Corporate Debtor's status on the MCA-21 site.

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Issues Involved:
1. Whether the claim of the Operational Creditor against the Corporate Debtor is valid under the Insolvency & Bankruptcy Code, 2016.
2. Whether there was a pre-existing dispute between the parties.
3. Whether the invoices raised by the Operational Creditor were approved by the Fund Manager as required.
4. Whether there is a debtor-creditor relationship between the Operational Creditor and the Corporate Debtor.

Detailed Analysis:

1. Validity of the Claim under Insolvency & Bankruptcy Code, 2016:

The Operational Creditor, Messrs Cerestra Advisors Private Limited, filed a petition under Section 9 of the Insolvency & Bankruptcy Code, 2016, seeking the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Messrs MN Takshila Industries Private Limited, for a default amounting to Rs. 4,17,13,343/-. The petition was based on the Advisory Agreement dated 5-9-2016 and the Addendum Agreement dated 1-3-2018, which required the Corporate Debtor and its subsidiaries to pay advisory fees for services rendered.

2. Pre-existing Dispute:

The Corporate Debtor contended that there was a pre-existing dispute, citing a Notice of Breach dated 29-10-2018 issued by the Fund Manager, which was prior to the Demand Notice issued by the Operational Creditor on 20-3-2019. The Tribunal found that the Notice of Breach was between the Fund Manager and the Operational Creditor and not directly involving the Corporate Debtor. The Tribunal noted that the Corporate Debtor made part-payment of Rs. 50,00,000/- and deducted TDS after the Notice of Breach, indicating no direct dispute with the Operational Creditor regarding the invoices.

3. Approval of Invoices by Fund Manager:

The Corporate Debtor argued that the invoices raised by the Operational Creditor required prior approval by the Fund Manager as per Clause 2.3 of the Addendum Agreement. The Tribunal observed that the Corporate Debtor made part-payment and deducted TDS, suggesting that there was implicit approval of the invoices by the Fund Manager. The Tribunal did not accept the Corporate Debtor's contention that the invoices were not approved, as there was no objection raised by the Corporate Debtor at the time of making part-payment or deducting TDS.

4. Debtor-Creditor Relationship:

The Corporate Debtor claimed that there was no debtor-creditor relationship as the services were rendered to the Fund Manager, and any payment was contingent upon the approval of the Fund Manager. The Tribunal, however, noted that the Addendum Agreement explicitly allowed the Operational Creditor to raise invoices on the Corporate Debtor and its subsidiaries. The Tribunal concluded that the Corporate Debtor was liable to pay the advisory fees as per the Addendum Agreement, establishing a debtor-creditor relationship.

Conclusion:

The Tribunal admitted the petition under Section 9 of the Insolvency & Bankruptcy Code, 2016, and initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Tribunal declared a moratorium as per Section 14 of the Code and appointed an Interim Resolution Professional. The Tribunal directed that the public announcement of the initiation of CIRP be made immediately and ordered the Registry to notify the Registrar of Companies, Hyderabad, to update the status of the Corporate Debtor on the MCA-21 site of the Ministry of Corporate Affairs.

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