Corporate Insolvency Process Initiated against Non-Participating Debtor

The Adjudicating Authority admitted the application for the initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency & Bankruptcy Code, 2016 against the Corporate Debtor due to outstanding dues claimed by the Operational Creditor. The Authority noted the absence of the Corporate Debtor's participation, leading to the appointment of an Interim Resolution Professional (IRP) and declaration of a moratorium. The case proceeded with the aim of managing the Corporate Debtor's operations, protecting assets, and ensuring the continuation of supplies, with further proceedings scheduled for a later date.

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Issues:
Initiation of Corporate Insolvency Resolution Process under Section 9 of IBC, 2016 against a Corporate Debtor for outstanding dues.

Analysis:
The Operational Creditor filed an application under Section 9 of the Insolvency & Bankruptcy Code, 2016 against the Corporate Debtor for the initiation of Corporate Insolvency Resolution Process due to outstanding dues claimed at Rs. 16,79,221 plus interests. The Operational Creditor supplied material between July 2018 to June 2019, invoiced for Rs. 21,21,702, with only partial payment received, leaving a balance outstanding. The Corporate Debtor issued Post Dated Cheques, which were dishonored, prompting the Operational Creditor to issue a notice under Section 8 of the IBC, 2016 on 30.8.2019. Despite service of notice, the Corporate Debtor did not appear, leading to an ex-parte hearing. The application highlighted the absence of any dispute regarding the debt, emphasizing the due and payable nature of the amount claimed.

The Adjudicating Authority noted the non-participation of the Corporate Debtor in the proceedings and decided the case based on the submissions by the Operational Creditor. It was observed that there were open charges on the Corporate Debtor's assets of significant value. The lack of Corporate Debtor's participation led to the inference that they wished to be admitted into CIRP. The Authority emphasized the importance of preventing any hidden attempts by the management/owners of the Corporate Debtor, especially since there was no data provided regarding the classification of the account as NPA by any Financial Creditor. The application was deemed complete, defect-free, and compliant with the IBC, 2016 provisions. The appointment of an Interim Resolution Professional (IRP) was made, and the application was admitted based on the debt being due, not barred by limitation, and no pre-existing dispute.

The Adjudicating Authority declared a moratorium prohibiting various actions against the Corporate Debtor as per Section 14(1) of the Code. The moratorium would remain in effect until the completion of the Corporate Insolvency Resolution Process or until a Resolution Plan was approved or liquidation ordered. The appointed IRP was tasked with managing the operations of the Corporate Debtor, ensuring the continuation of supplies, and protecting the property value. The Operational Creditor was directed to pay an advance to the IRP for the smooth conduct of the CIRP. The Registry was instructed to communicate the order to all relevant parties and upload it on the website. The case was allowed, with further consideration scheduled for a later date.

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