2020 (12) TMI 35 - Tri - Insolvency and Bankruptcy

Tribunal Admits Insolvency Application, Imposes Moratorium on Corporate Debtor

The Tribunal admitted the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, for unpaid dues against a Corporate Debtor. A ... Admission of application under Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - initiation of Corporate Insolvency Resolution Process - moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - service of demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - operational debt and Operational CreditorService of demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - proceedings in absence of Corporate Debtor - Sufficiency of service of notices and continuation of proceedings despite non-appearance of the Corporate Debtor - HELD THAT: - The Tribunal recorded attempts to serve the Corporate Debtor at the registered office which returned with postal remark 'addressee not found', and further directed service by email and publication in two widely circulated newspapers. The Operational Creditor filed proof that the emailed communication bounced and that paper publication was effected in both English and Malayalam. The Corporate Debtor did not appear or file any representation thereafter. On this basis the Tribunal proceeded to hear and decide the application in the absence of the Corporate Debtor, treating the statutory demand notice and subsequent modes of publication as sufficient for the purposes of proceeding under the Code. [Paras 4]Service by registered post, attempted email and mandated newspaper publication were treated as sufficient and the Tribunal proceeded in the absence of the Corporate Debtor.Admission of application under Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - operational debt and Operational Creditor - Whether the Section 9 application filed by the Operational Creditor deserved admission - HELD THAT: - Relying on the definition of Operational Creditor and Operational Debt and on the requirements of Section 9(3)(a)-(c) of the Code, the Tribunal examined the record which showed a claimed operational debt and that the cause of action arose before March 2020. The Tribunal found the application complete and that the Operational Creditor was entitled to claim unpaid dues. On that basis the Tribunal held the application fit for admission under Section 9(5). [Paras 5, 6]The Section 9 application was admitted.Moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016 - effect of moratorium on proceedings and transactions - Imposition and scope of the moratorium consequent to admission of the Section 9 application - HELD THAT: - Upon admission of the application the Tribunal directed that the moratorium envisaged under Section 14(1) shall follow in relation to the Corporate Debtor. The order specified the customary prohibitions on institution or continuation of suits or proceedings against the Corporate Debtor, on transfer or disposal of assets, on actions to enforce security interests (including under SARFAESI Act) and on recovery of property occupied by the Corporate Debtor. It also directed that services to the Corporate Debtor, if continuing, shall not be terminated during the moratorium and noted the limited exceptions as provided under the Code. [Paras 6, 7]Moratorium was imposed with the standard prohibitions and directions as specified in the order.Appointment of Interim Resolution Professional - public pronouncement of CIRP - Appointment of Interim Resolution Professional and requirement of public announcement following admission - HELD THAT: - As the Operational Creditor did not propose a nominee, the Tribunal appointed an Interim Resolution Professional by name and directed compliance with IBBI regulations regarding fees and submission of the Authorization for Assignment by the Insolvency Professional Agency within two days. The Tribunal further directed that the public pronouncement of the Corporate Insolvency Resolution Process be made immediately as specified under the Code and ordered communication of the order to the parties and the IRP by the Registry. [Paras 8, 9]Interim Resolution Professional appointed; public pronouncement and communication of the order directed.Final Conclusion: The Tribunal admitted the Section 9 application, imposed the statutory moratorium, appointed an Interim Resolution Professional and directed public pronouncement and communication of the order; the proceedings were lawfully continued despite non-appearance of the Corporate Debtor after deemed service by publication and other attempted modes. Issues Involved:Application under Section 9 of the Insolvency & Bankruptcy Code, 2016 for unpaid dues against a Corporate Debtor.Analysis:1. Background and Claim: The Operational Creditor filed an application under Section 9 of the Insolvency & Bankruptcy Code, 2016, seeking recovery of unpaid dues from the Corporate Debtor. The Operational Creditor was appointed as a Super Stockiest of the Corporate Debtor, but the agreement was terminated, leading to a claim of Rs. 25,24,067. The Corporate Debtor admitted the liability through email communications and issued post-dated cheques, which were later dishonored.2. Legal Notices and Demand: The Operational Creditor issued a legal notice under the Negotiable Instruments Act, 1881, and a statutory notice under Section 8 of the Insolvency and Bankruptcy Code, 2016, demanding payment of the outstanding amount. Despite the notices, the Corporate Debtor failed to respond or make the payment within the stipulated time frame, indicating an inability to pay its debts.3. Procedural Compliance: The Tribunal examined the compliance with the provisions of the Insolvency and Bankruptcy Code, 2016, particularly focusing on the definitions of Operational Creditor, Operational Debt, and the process for initiating Corporate Insolvency Resolution Process (CIRP) under Section 9(3)(a)(b)(c) of the Code. The claim amount and the cause of action were verified to confirm the admissibility of the application.4. Admission of Application: Considering the facts presented and the documents submitted by the Operational Creditor, the Tribunal found the application complete and admitted it under Section 9(5) of the Insolvency and Bankruptcy Code, 2016. Consequently, a moratorium was declared on the Corporate Debtor, restricting various actions against it, and an Interim Resolution Professional was appointed to oversee the resolution process.5. Moratorium and Resolution Process: The moratorium imposed on the Corporate Debtor included restrictions on legal actions, asset disposal, security enforcement, and property recovery. It was directed that services to the Corporate Debtor should not be terminated during the moratorium period, except for notified transactions. The moratorium would remain in effect until the completion of the Corporate Insolvency Resolution Process or until liquidation is ordered.6. Appointment of Interim Resolution Professional: As the Operational Creditor did not suggest a name, the Tribunal appointed an Interim Resolution Professional to manage the resolution process. The appointed professional was directed to comply with the IBBI Regulations and submit the necessary Authorization for Assignment within the specified timeframe.7. Communication and Compliance: The Registry was instructed to communicate the order to all relevant parties, including the Operational Creditor, the Corporate Debtor, and the Interim Resolution Professional, to ensure compliance with the directives issued by the Tribunal.In conclusion, the Tribunal admitted the application, imposed a moratorium on the Corporate Debtor, appointed an Interim Resolution Professional, and directed compliance with the relevant regulations to facilitate the Corporate Insolvency Resolution Process effectively.