Petition for Corporate Insolvency Rejected: Creditor Must Serve Proper Notice

The Tribunal dismissed the petition for the initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the IBC, 2016, as the Petitioner failed to establish the insolvency of the Corporate Debtor despite admitting the debt. The Petitioner was directed to serve notice properly, and the Respondent was given two months to settle the outstanding dues. Failure to settle within the specified period would allow the Petitioner to file a fresh case.

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Issues involved:
Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the IBC, 2016 based on default by the Corporate Debtor.

Detailed Analysis:
The case involved C.P. (IB) No. 140/BB/2020 filed by M/s. Famous Innovations Digital Creative Private Limited as the Operational Creditor seeking to initiate CIRP against M/s. Umaiyal Enterprises Services Private Limited, the Corporate Debtor, for defaulting on a total amount of &8377; 17,87,141. The Operational Creditor provided services to the Corporate Debtor as per a Service Agreement, and despite reminders and a Demand Notice, the payment was not made, leading to the initiation of the insolvency process.

The Tribunal noted that the Respondent had broadly admitted the debt but disputed it in their reply. However, the Petitioner did not establish the insolvency of the Corporate Debtor, merely alleging non-payment. The Tribunal emphasized the need to prove both the debt and default, along with the insolvency of the Corporate Debtor. Despite granting sufficient time, the Petitioner failed to serve notice on the Respondent, leading the Tribunal to dispose of the petition with a direction for the Respondent to settle the outstanding dues instead of prolonging the litigation.

The judgment directed the Respondent to settle the issue within two months, considering the Operational Creditor's status as a small entrepreneur. If the Respondent failed to settle the matter within the specified period, the Petitioner was given the liberty to file a fresh case for the same cause of action. The Registry was instructed to provide a copy of the order to both parties for necessary action.

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