2021 (1) TMI 862 - Tri - Insolvency and Bankruptcy

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 & ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditor - no information regarding Financial Creditor who has classified the account of the Corporate Debtor as NPA - existence of debt and dispute or not - HELD THAT:- It is noted that Corporate Debtor has not participated in this proceeding and, therefore, we proceed to decide this application after hearing the learned counsel Mr. Tirth Nayak for the Operational Creditor and material on record. From the perusal of MCA data, it is noted that there are open charges on the assets of the Corporate Debtor which are of significant value. Thus, non participation of Corporate Debtor leads to an inference that Corporate Debtor in fact wishes to be admitted into CIRP. We, as Adjudicating Authority, have got limited options in such situations. The Corporate Debtor is not MSME; hence, any attempt by the management/ owners of the Corporate Debtor to complete in a hidden manner needs to be prevented. No data has been provided to us as to whether there is any Financial Creditor who has classified the account of the Corporate Debtor as NPA and, if so, then from which date? This is particularly important from the aspect that management of the Corporate Debtor should not come back indirectly. The role of COC would be clearly important to prevent the misuse of provisions of Section 29A of the CODE. The application is liable to be admitted as there is a debt which is due and payable i.e. not barred by limitation and there is no pre-existing dispute. The application is otherwise complete and defect free and complies with the all requirements of provisions of IBC, 2016 r. w. relevant Regulations - application admitted - moratorium declared. 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.