2021 (5) TMI 312 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Process Initiated for Non-Payment of Invoices

The National Company Law Tribunal, Chennai Bench, initiated Corporate Insolvency Resolution Process under Section 9 of IBC due to non-payment of invoices ... Corporate Insolvency Resolution Process - Operational Creditor application under Section 9 - Admission of Section 9 application - Appointment of Interim Resolution Professional - Moratorium under Section 14(1) - Consent Terms and Memorandum of CompromiseOperational Creditor application under Section 9 - Admission of Section 9 application - Corporate Insolvency Resolution Process - The Section 9 application filed by the operational creditor for initiation of CIRP against the corporate debtor was admitted. - HELD THAT: - The Tribunal considered the pleadings and supporting documents, including earlier decree and demand notices, and found the operational creditor's claim and default established on the material before it. Having heard both parties and on the basis of invoices and correspondence, the Adjudicating Authority proceeded to admit the application and initiate the Corporate Insolvency Resolution Process. [Paras 5, 8]IBA/1115/2019 stands admitted and CIRP is initiated against the corporate debtor.Appointment of Interim Resolution Professional - An Interim Resolution Professional was appointed to manage the CIRP and initial expenses were fixed. - HELD THAT: - The applicant had not proposed a name for the Interim Resolution Professional; therefore, relying on the list furnished by the IBBI the Adjudicating Authority appointed Mr. B. Sathrukkannan (registration details recorded in the order) to act as Interim Resolution Professional. The Tribunal directed that the Interim Resolution Professional be paid an initial expense from the applicant. [Paras 5, 6]Mr. B. Sathrukkannan is appointed as Interim Resolution Professional and shall be paid initial expenses of Rs. 1,00,000/- by the applicant.Moratorium under Section 14(1) - The moratorium under Section 14(1) was declared to operate from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. - HELD THAT: - Upon admission of the Section 9 application the Tribunal applied the statutory moratorium provisions prohibiting institution or continuation of suits or proceedings, transfer or disposition of assets, enforcement of security, and recovery of property, subject to exceptions and notified transactions. The order also directed public announcement of the CIRP as specified under the Code. [Paras 6]The moratorium envisaged under Section 14(1) is declared and shall have effect from this order until completion of the CIRP or until further order as specified.Consent Terms and Memorandum of Compromise - The interlocutory application filed by the corporate debtor seeking time based on the Memorandum of Compromise was closed. - HELD THAT: - The Tribunal noted the parties' earlier consent terms and subsequent memorandum of compromise and payments made, but recorded that no further payments had been made by the corporate debtor. In view of admission of the Section 9 application and appointment of the IRP, the interlocutory application filed by the corporate debtor for time was closed. [Paras 4, 7]IA/1141/IB/2020 is closed.Final Conclusion: The Tribunal admitted the operational creditor's Section 9 petition and initiated CIRP against the corporate debtor, appointed an Interim Resolution Professional from the IBBI panel with specified initial payment, declared the statutory moratorium to operate from the order, and closed the corporate debtor's interlocutory application seeking time under the memorandum of compromise. Issues:Initiation of Corporate Insolvency Resolution Process under Section 9 of IBC, Failure to honor Consent Terms leading to demand for payment, Application for time to settle payment due to COVID-19 pandemic, Appointment of Interim Resolution Professional, Declaration of moratorium, Essential goods and services supply during moratorium, Effect of moratorium till completion of resolution process or liquidation, Public announcement of Corporate Insolvency Resolution Process.Initiation of Corporate Insolvency Resolution Process under Section 9 of IBC:The application was filed by the Operational Creditor seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor due to non-payment of invoices. The Operational Creditor had previously obtained a judgment and decree against the Corporate Debtor for a specific sum. Despite earlier Consent Terms and subsequent Memorandum of Compromise, the Corporate Debtor failed to honor the payment terms, leading to the demand for payment and the filing of the application under Section 9 of the Insolvency & Bankruptcy Code, 2016.Failure to honor Consent Terms leading to demand for payment:The Corporate Debtor had entered into Consent Terms and a Memorandum of Compromise with the Operational Creditor to settle outstanding dues. However, the Corporate Debtor failed to make further payments as agreed due to the COVID-19 pandemic. This led to the Operational Creditor issuing a demand notice for payment, and subsequently, the Corporate Debtor filed an application seeking time to settle the payment based on the Memorandum of Compromise.Appointment of Interim Resolution Professional:The Adjudicating Authority appointed an Interim Resolution Professional based on the list furnished by IBBI, as the Operational Creditor did not propose a name. Mr. B. Sathrukkannan was appointed as the Interim Resolution Professional and authorized to carry out the functions as per The Insolvency & Bankruptcy Code. The Operational Creditor was directed to pay initial expenses to the appointed professional.Declaration of moratorium, Essential goods and services supply during moratorium, Effect of moratorium till completion of resolution process or liquidation:Upon admitting the application, the Adjudicating Authority declared a moratorium prohibiting various actions against the Corporate Debtor. The order of moratorium was to be in effect until the completion of the corporate insolvency resolution process or until the Bench approved the resolution plan or ordered liquidation. The supply of essential goods and services to the Corporate Debtor was not to be terminated during the moratorium period.Public announcement of Corporate Insolvency Resolution Process:The Bench ordered the immediate public announcement of the Corporate Insolvency Resolution Process as specified under Section 13 of the Code. The Registry was directed to communicate the order to the Operational Creditor, Corporate Debtor, and the appointed Interim Resolution Professional via email.This detailed analysis covers the key issues addressed in the judgment delivered by the National Company Law Tribunal, Chennai Bench.