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 by the Corporate Debtor despite Consent Terms and a Memorandum of Compromise. An Interim Resolution Professional was appointed, and a moratorium was declared until completion of the resolution process or liquidation. Essential goods and services supply was to continue during the moratorium. The public announcement of the Corporate Insolvency Resolution Process was ordered in accordance with the Insolvency & Bankruptcy Code.

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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.

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