2021 (5) TMI 305 - Tri - Insolvency and Bankruptcy

Tribunal admits petition under Insolvency & Bankruptcy Code, appoints Interim Resolution Professional

The Tribunal found the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 maintainable, admitted it, and initiated the Corporate ... Operational creditor - default - petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - maintainability of Section 9 petition - corporate insolvency resolution process - moratorium - appointment of interim resolution professional - afterthought defenceOperational creditor - default - petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - maintainability of Section 9 petition - afterthought defence - Whether the Section 9 petition filed by the claimant as an operational creditor is maintainable and liable to be admitted for default. - HELD THAT: - The Tribunal examined the pleadings, documents and submissions and found that the Operational Creditor was an employee to whom salary dues were payable and that he issued a demand notice which remained unanswered. The Corporate Debtor raised, for the first time in its reply, allegations of deficiency in services and managerial failures causing losses; no documentary evidence was produced to show these issues were urged in response to the demand or Form-3 notice. The Bench treated those contentions as afterthoughts unsubstantiated by record. On the material before it, the Tribunal was satisfied that the Operational Creditor had not received the salary dues and that the defence set up by the Corporate Debtor did not negate the existence of default or the maintainability of the petition under Section 9. [Paras 15, 16]The Section 9 petition filed by the Operational Creditor is maintainable and is admitted for initiation of the corporate insolvency resolution process.Corporate insolvency resolution process - appointment of interim resolution professional - moratorium - Consequential reliefs following admission - appointment of an Interim Resolution Professional and declaration of moratorium with ancillary directions. - HELD THAT: - Having admitted the petition, the Tribunal applied the statutory consequences under the Code. Relying on the IBBI panel to avoid delay, the Tribunal appointed the named Insolvency Professional as Interim Resolution Professional and directed him to file communications and papers. The Bench declared moratorium with the statutory prohibitions on institution or continuation of suits, transfer or disposal of assets, enforcement of security, and directed continuity of supply of essential goods or services, public announcement of the CIRP and related administrative steps. The moratorium is to operate from the date of the order until completion of the CIRP or approval of a resolution plan or liquidation order, whichever is earlier. [Paras 17, 18]An Interim Resolution Professional is appointed and moratorium is declared with the specified directions; the Registry is directed to make the requisite public and administrative filings.Final Conclusion: The Tribunal admitted the Section 9 petition filed by the Operational Creditor for unpaid salary dues, appointed an Interim Resolution Professional from the IBBI panel, and declared moratorium with the statutory directions; the Corporate Insolvency Resolution Process is accordingly initiated. Issues Involved:1. Whether the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 is maintainable.2. Whether the Operational Creditor qualifies as an operational creditor under the provisions of the Insolvency and Bankruptcy Code, 2016.3. Whether there was a default in payment of salary dues by the Corporate Debtor.4. Whether there were deficiencies in the services rendered by the Operational Creditor.5. Whether the Corporate Insolvency Resolution Process (CIRP) should be initiated against the Corporate Debtor.Issue-wise Detailed Analysis:1. Maintainability of the Petition:The Corporate Debtor argued that the petition is devoid of merits, not maintainable, and should be dismissed in limini. However, the Tribunal found that the petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, read with Rule 6 of the Insolvency & Bankruptcy (Application to the Adjudicating Authority) Rules, 2016, seeking admission of the Petition, initiation of CIRP, granting moratorium, and appointment of an Interim Resolution Professional. The Tribunal admitted the petition, indicating its maintainability.2. Qualification as an Operational Creditor:The Corporate Debtor contended that Mr. Ratna Prakash Golla does not qualify as an operational creditor under the provisions of the Insolvency and Bankruptcy Code, 2016. However, the Tribunal noted that the Operational Creditor was an employee to whom the Corporate Debtor owed payments towards salaries, thus qualifying him as an operational creditor under the Code.3. Default in Payment of Salary Dues:The Operational Creditor alleged that the Corporate Debtor defaulted on an amount of Rs. 10,03,417/- as of 30.07.2017. The Tribunal found that the Operational Creditor had rendered services without any remark and was regularly paid until June 2016. The Corporate Debtor made part payments but failed to clear the outstanding dues despite repeated requests and a demand notice. The Tribunal concluded that the Operational Creditor had not received his dues, and the Corporate Debtor's submissions appeared to be an afterthought without documentary evidence.4. Deficiencies in Services Rendered:The Corporate Debtor argued that there were deficiencies in the services rendered by the Operational Creditor, which led to financial losses. However, the Tribunal found no documentary evidence supporting these claims. The Tribunal noted that the Corporate Debtor had not raised these service issues in response to the Form-3 notice or demand notice, suggesting that these claims were an afterthought.5. Initiation of CIRP:Given the default in payment of salary dues and the lack of convincing evidence regarding deficiencies in services, the Tribunal decided to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Tribunal appointed Mr. Chandra Sekhar Arasada as the Interim Resolution Professional and declared a moratorium as per Section 14 of the Code, with specific directions to prohibit the institution of suits, continuation of pending suits, and other actions against the Corporate Debtor.Conclusion:The Tribunal admitted the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, initiated the Corporate Insolvency Resolution Process against the Corporate Debtor, and appointed an Interim Resolution Professional. The Tribunal also declared a moratorium and provided specific directions to ensure the smooth conduct of the CIRP.