2021 (4) TMI 1001 - Tri - Insolvency and Bankruptcy

Tribunal Admits Operational Creditor's Application Against Corporate Debtor for Default and Debt

The Tribunal admitted the Application under Section 9 of the IBC, 2016, filed by an Operational Creditor against a Private Limited Company, the Corporate ... Operational debt and default - initiation of Corporate Insolvency Resolution Process under Section 9 - service of statutory demand notice under Section 8 - limitation for filing Section 9 application - pecuniary jurisdiction of the Adjudicating Authority - appointment of Interim Resolution Professional - moratorium under Section 14 - payment of security to Interim Resolution ProfessionalOperational debt and default - service of statutory demand notice under Section 8 - The Operational Creditor proved existence of an operational debt and default by the Corporate Debtor and that no dispute was brought to its notice in response to the statutory demand. - HELD THAT: - The Operational Creditor produced invoices and a ledger extract evidencing the principal and interest claimed. A statutory demand in Form 3/4 was sent and received by the Corporate Debtor, and an affidavit under Section 9(3)(b) stated there was no reply or pending dispute. The Corporate Debtor did not appear at successive hearings. On these materials the Tribunal found the debt to be an operational debt and that the Corporate Debtor had committed default in repayment. [Paras 3, 5, 9, 10]Existence of operational debt and default established; no dispute shown in response to the demand.Limitation for filing Section 9 application - The Section 9 application was within the period of limitation. - HELD THAT: - The invoices relied upon were issued in April and June 2017 and the application was filed on 16.12.2019. The Tribunal considered these dates and the ledger extract filed by the Operational Creditor and concluded that the petition falls within the limitation period for instituting a Section 9 application. [Paras 9]Section 9 application held to be filed within limitation.Pecuniary jurisdiction of the Adjudicating Authority - The Tribunal had pecuniary jurisdiction to entertain the application. - HELD THAT: - The pecuniary jurisdictional threshold was enhanced from Rs. 1 lakh to Rs. 1 crore effective 24.03.2020, but the present application was filed on 16.12.2019. The Tribunal therefore found that it had jurisdiction to hear the petition filed prior to the enhancement. [Paras 11]Adjudicating Authority possessed pecuniary jurisdiction over the petition as filed.Initiation of Corporate Insolvency Resolution Process under Section 9 - appointment of Interim Resolution Professional - The petition under Section 9(5) was admitted and an Interim Resolution Professional was appointed. - HELD THAT: - Applying the findings that an operational debt existed, default had occurred, no dispute was shown and the petition was within limitation and within its pecuniary jurisdiction, the Tribunal admitted the Section 9 petition under Section 9(5) of the Code. The Tribunal, noting that the Operational Creditor had not proposed an IRP, appointed an Interim Resolution Professional from the list furnished by the IBBI subject to disclosure and disciplinary checks. [Paras 12, 16]Application admitted under Section 9(5); Interim Resolution Professional appointed subject to required disclosures and absence of pending disciplinary proceedings.Moratorium under Section 14 - Moratorium under Section 14 was directed to follow from the date of the admission order and its scope and duration were specified. - HELD THAT: - Consequent to admission of the Section 9 application, the Tribunal applied the moratorium provisions, restraining institution or continuation of suits or proceedings, transfer or disposal of assets, enforcement of security interests and recovery of property by lessors, while noting statutory exceptions and the provisions preserving supply of essential goods and services. The Tribunal also recorded the duration principle that the moratorium continues until completion of the CIRP unless terminated earlier by approval of a resolution plan or liquidation order. [Paras 12, 13, 14]Moratorium under Section 14 directed with its statutory scope and duration.Payment of security to Interim Resolution Professional - The Operational Creditor was directed to pay security to the Interim Resolution Professional to meet expenses of the CIRP. - HELD THAT: - The Tribunal directed the Operational Creditor to deposit a specified sum with the Interim Resolution Professional upon her filing the necessary declaration under the Code, to enable performance of functions in accordance with the IBBI Regulations. [Paras 15]Operational Creditor directed to pay security to the Interim Resolution Professional to meet out CIRP expenses.Final Conclusion: The Section 9 petition filed by the Operational Creditor is admitted; the Corporate Insolvency Resolution Process is initiated, an Interim Resolution Professional is appointed subject to required disclosures, the moratorium under Section 14 is directed to follow, and the Operational Creditor is directed to furnish the prescribed security to the Interim Resolution Professional; the Registry is directed to communicate the order to relevant parties and IBBI. Issues:- Application under Section 9 of IBC, 2016 seeking to initiate Corporate Insolvency Resolution Process.- Existence of operational debt and default by Corporate Debtor.- Deliberate avoidance of Corporate Debtor to appear before the Tribunal.- Jurisdiction of the Tribunal.- Appointment of Interim Resolution Professional.- Imposition of moratorium and its implications.- Payment to Interim Resolution Professional.Analysis:1. The Application was filed by an Operational Creditor seeking to initiate Corporate Insolvency Resolution Process against a Private Limited Company, the Corporate Debtor, under Section 9 of IBC, 2016. The Operational Creditor claimed a principal sum along with interest, asserting that the Corporate Debtor failed to clear the dues despite Demand Notices and no pending disputes were notified by the Corporate Debtor.2. The Tribunal noted the absence of the Corporate Debtor during various hearings, indicating deliberate avoidance. The Operational Creditor provided invoices as evidence, showing the debt originated in 2017, well within the limitation period. The Corporate Debtor's non-response to the Demand Notice further supported the Operational Creditor's claim of default by the Corporate Debtor.3. Considering the facts presented, the Tribunal concluded that the Operational Creditor proved the existence of operational debt and default by the Corporate Debtor. With no objections raised by the Corporate Debtor, the Tribunal decided to admit the Application under Section 9(5) of the IBC, 2016.4. The Tribunal addressed the pecuniary jurisdiction, confirming its authority to entertain the Application based on the filing date. An Interim Resolution Professional was appointed from the latest list provided by the Insolvency and Bankruptcy Board of India, subject to necessary disclosures and no pending disciplinary proceedings.5. The Tribunal imposed a moratorium as per Section 14(1) of the Code, restricting certain actions against the Corporate Debtor during the resolution process. Essential supplies were to continue, and the duration of the moratorium was specified until the completion of the Corporate Insolvency Resolution Process.6. The Operational Creditor was directed to pay a specified amount to the Interim Resolution Professional to cover expenses. The Application was admitted, and the moratorium came into effect immediately. The Registry was tasked with communicating the Order to all relevant parties and authorities, ensuring compliance with the resolution process.