2021 (4) TMI 300 - Tri - Insolvency and Bankruptcy

NCLT Cuttack Bench asserts jurisdiction over CIRP application under Insolvency and Bankruptcy Code

The National Company Law Tribunal Cuttack Bench confirmed its jurisdiction to hear the application under Section 9 of the Insolvency and Bankruptcy Code, ... Corporate Insolvency Resolution Process initiation under Insolvency and Bankruptcy Code - Operational debt and default - Limitation for filing Section 9 application - Jurisdiction of Adjudicating Authority - Appointment of Interim Resolution Professional - Moratorium under Section 14 - Public announcement and claim submission - Duty of ex-management to cooperate - Interim funding by Operational Creditor for IRP expensesJurisdiction of Adjudicating Authority - This Adjudicating Authority has jurisdiction to hear the Section 9 application. - HELD THAT: - The registered office of the corporate debtor is situated within the territorial jurisdiction of this Bench and, accordingly, the Tribunal has jurisdiction to adjudicate the Section 9 application filed by the operational creditor. [Paras 1]Jurisdiction of the Adjudicating Authority upheld.Limitation for filing Section 9 application - The application is within the period of limitation. - HELD THAT: - The invoices relied upon relate to dates from 11.02.2019 to 16.05.2019 and the petition was filed on 03.02.2020; hence the claim falls within the prescribed limitation period for initiating proceedings under Section 9. [Paras 3]Application held to be within limitation.Operational debt and default - Demand notice and absence of pre-existing dispute - Debt and default were established and no pre-existing dispute prevented admission of the petition. - HELD THAT: - The operational creditor produced invoices and statement of accounts and issued demand notices (Forms 3 and 4) which were received by the corporate debtor. The Tribunal found that the outstanding operational debt is due and payable and that there was no pre-existing dispute on the debt which would bar admission. Although the corporate debtor admitted liability in part and relied on extended credit terms and a post-event adverse incident, the Tribunal concluded that default existed. [Paras 4, 6]Debt and default proved; absence of any valid pre-existing dispute for the purposes of Section 9 recorded.Corporate Insolvency Resolution Process initiation under Insolvency and Bankruptcy Code - Moratorium under Section 14 - Public announcement and claim submission - The Section 9 application is admitted and CIRP is initiated with moratorium and directions for public announcement and claim submission. - HELD THAT: - Upon finding debt and default, the Tribunal admitted the application under Sections 8 and 9 and ordered initiation of the Corporate Insolvency Resolution Process against the corporate debtor. Consequential directions were issued: declaration of moratorium as per Section 14, instructions to the Interim Resolution Professional to make the public announcement and to invite claims, and clarification that the moratorium will operate until completion of CIRP subject to exceptions prescribed by the Code. [Paras 6, 7]Application admitted; CIRP initiated and moratorium ordered with directions for public announcement and claim submission.Appointment of Interim Resolution Professional - An Interim Resolution Professional is appointed. - HELD THAT: - The operational creditor had not proposed an IRP, and the Tribunal appointed Mr. Saradindu Jena (registration details recorded in the order) to perform the functions of IRP including ascertaining particulars of creditors and convening the Committee of Creditors. [Paras 6]Mr. Saradindu Jena appointed as Interim Resolution Professional.Interim funding by Operational Creditor for IRP expenses - Operational Creditor directed to deposit interim amount to meet IRP expenses. - HELD THAT: - The Tribunal directed the operational creditor to deposit a specified sum with the IRP within three days to meet expenses of the IRP in discharge of his duties, subject to adjustment by the Committee of Creditors as per accounts maintained by the IRP. [Paras 7]Operational creditor directed to make interim deposit for IRP expenses.Duty of ex-management to cooperate - IRP convening Committee of Creditors and reporting - Ex-management directed to cooperate and IRP directed to convene CoC and file progress report. - HELD THAT: - The Tribunal ordered the ex-management to furnish all documents and information in their possession to the IRP within one week, warning of coercive steps in case of non-compliance. The IRP was directed to convene a meeting of the Committee of Creditors, submit resolutions passed by the CoC, and file the first progress report by the date specified by the Tribunal. [Paras 6, 7]Ex-management obliged to cooperate; IRP to convene CoC and file progress report as directed.Final Conclusion: The Section 9 petition filed by the operational creditor was admitted, the Corporate Insolvency Resolution Process initiated against the corporate debtor, an Interim Resolution Professional was appointed, moratorium declared with directions for public announcement and claim submission, the operational creditor ordered to provide interim funding for the IRP, ex-management directed to cooperate, and the IRP tasked to convene the Committee of Creditors and file progress reports. Issues:- Jurisdiction of the Adjudicating Authority- Period of limitation for filing the application- Debt and default proof- Appointment of Interim Resolution Professional- Moratorium order and its implicationsThe judgment delivered by the National Company Law Tribunal Cuttack Bench involved several key issues. Firstly, the Adjudicating Authority established its jurisdiction based on the location of the respondent's Registered Office. The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process against the respondent. The Tribunal confirmed its jurisdiction to hear the application.Regarding the period of limitation for filing the application, the invoices in question were dated within a specific timeframe, from 11.02.2019 to 16.05.2019. The Tribunal found that the application fell well within the period of limitation, allowing it to proceed.The Tribunal examined the debt and default claims presented by both parties. The applicant alleged that the respondent owed a total amount of &8377; 18,12,488 based on invoices and terms and conditions, including a 24% interest for delayed payment. On the other hand, the respondent disputed the interest claim and argued that they had settled various bills within extended credit periods. Despite admitting the amount due, the respondent claimed no default in payment due to unforeseen circumstances, such as a fire accident causing financial strain.After hearing both parties, the Tribunal found the debt and default to be proven. However, since the applicant did not propose the name of any Interim Resolution Professional, the Tribunal appointed Mr. Saradindu Jena as the Interim Resolution Professional to oversee the process.The Tribunal issued a comprehensive order admitting the application under Sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process against the respondent. A moratorium order was passed, prohibiting certain actions against the Corporate Debtor, and essential services were to continue during this period. The order detailed the responsibilities of the Interim Resolution Professional, including convening a meeting of the Committee of Creditors and submitting progress reports. Additionally, the Operational Creditor was directed to deposit a sum with the Interim Resolution Professional for expenses, and the ex-management was instructed to provide necessary documents and information promptly.In conclusion, the judgment addressed various legal aspects, including jurisdiction, debt and default determination, appointment of the Interim Resolution Professional, and the implications of the moratorium order, ensuring a structured process for the Corporate Insolvency Resolution.