2021 (5) TMI 313 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Process Commenced under Section 9

The Tribunal admitted the Application under Section 9 of the Insolvency and Bankruptcy Code, 2016, initiating Corporate Insolvency Resolution Process ... Debt and default - initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium under Section 14 - service by publication and ex-parte proceeding - operational creditor's demand notice under Section 8Debt and default - operational creditor's demand notice under Section 8 - The Operational Creditor has proved existence of an operational debt and a default by the Corporate Debtor. - HELD THAT: - On scrutiny of the pleadings and the documents filed by the Operational Creditor - including work orders, invoices, statement of account, balance sheet of the Corporate Debtor and accounts confirming non-payment - the Adjudicating Authority concluded that the claimed operational debt and the default were established. The record shows invoices acknowledged by the Corporate Debtor, certification of works, and issuance of a demand notice under Form-3 which the Operational Creditor served prior to filing the Section 9 application. Having regard to these materials, the Tribunal found the statutory threshold for admission under Section 9 satisfied and proceeded to admit the application. [Paras 3, 4, 6]Debt and default established; statutory threshold for admission under Section 9 satisfied.Initiation of Corporate Insolvency Resolution Process - service by publication and ex-parte proceeding - The IBA under Section 9 is admitted and Corporate Insolvency Resolution Process is initiated against the Corporate Debtor. - HELD THAT: - Having found debt and default, the Tribunal admitted IBA/1429/2019 and ordered initiation of CIRP. The Corporate Debtor was called and, after absence despite substituted service by publication, was proceeded against ex parte. The admission order was passed in terms of Section 9(5), with directions to communicate the order to the parties and to IBBI. The admission also triggered the statutory consequences that follow admission under the Code. [Paras 5, 7, 12, 13]IBA admitted and CIRP initiated; Corporate Debtor proceeded against ex parte after substituted service by publication.Appointment of Interim Resolution Professional - An Interim Resolution Professional is appointed from the IBBI list in the absence of a name proposed by the Operational Creditor. - HELD THAT: - The Operational Creditor did not nominate an Insolvency Resolution Professional in its application. The Tribunal, relying on the list furnished by the Insolvency and Bankruptcy Board of India, appointed Mr. R. Velu (registration particulars recorded in the order) as Interim Resolution Professional, subject to there being no pending disciplinary proceedings and required disclosures under the applicable IBBI regulations being made within one week. This appointment is made in exercise of the Tribunal's power to ensure an IRP is in place immediately after admission. [Paras 8]Mr. R. Velu appointed as Interim Resolution Professional, subject to disclosures and absence of disciplinary proceedings.Moratorium under Section 14 - The moratorium contemplated by the Code comes into effect from the date of the admission order. - HELD THAT: - Consequent to admission under Section 9(5), the Tribunal declared that the moratorium as provided in Section 14 shall apply from the date of the order until completion of the CIRP or earlier cessation as provided by the Code. The order sets out the prohibitions during the moratorium, and notes the exceptions relating to supply of essential goods or services and transactions excluded by central notification. The duration and effect of the moratorium were stated in accordance with the statutory provisions reproduced in the order. [Paras 8, 9, 10]Statutory moratorium under Section 14 imposed from the date of the admission order until completion of CIRP (subject to statutory exceptions).Appointment of Interim Resolution Professional - Operational Creditor directed to deposit an amount to meet the IRP's initial costs. - HELD THAT: - In accordance with Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and to enable the Interim Resolution Professional to perform assigned functions, the Operational Creditor was directed to pay a sum to the IRP on his filing the requisite declaration. This order fixes the immediate financial obligation upon the Operational Creditor to fund initial IRP expenses. [Paras 11]Operational Creditor directed to pay the specified sum to the Interim Resolution Professional to meet initial expenses.Final Conclusion: The Tribunal admitted the Section 9 application, held that the Operational Creditor established debt and default, initiated CIRP against the Corporate Debtor, appointed an Interim Resolution Professional from the IBBI list subject to conditions, imposed the moratorium under Section 14 with statutory exceptions, and directed the Operational Creditor to furnish initial funds for the IRP; the Corporate Debtor was proceeded against ex parte after substituted service by publication. Issues involved:Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process due to default in payment by Corporate Debtor.Detailed Analysis:1. The Application filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, sought to initiate Corporate Insolvency Resolution Process against the Corporate Debtor for defaulting in payment of a substantial amount, including interest. The Operational Creditor provided detailed information regarding the contractual relationship and outstanding payments.2. The Operational Creditor presented evidence such as work orders, invoices, statement of account, and balance sheet to support their claim of non-payment by the Corporate Debtor. Despite multiple requests and legal notices, the Corporate Debtor failed to settle the outstanding debt, leading to the initiation of the insolvency proceedings.3. The Tribunal, after examining the submissions, documents, and evidence presented, concluded that the debt and default by the Corporate Debtor were established. Consequently, the Tribunal decided to admit the Application and initiate Corporate Insolvency Resolution Process against the Corporate Debtor.4. As the Operational Creditor did not name an Insolvency Resolution Professional, the Tribunal appointed an Interim Resolution Professional based on the list provided by the Insolvency and Bankruptcy Board of India. The Tribunal outlined the moratorium period and restrictions applicable to the Corporate Debtor during this phase.5. The Tribunal directed the Operational Creditor to pay a specified sum to the appointed Interim Resolution Professional to cover necessary expenses. The Order was communicated to all relevant parties and authorities for record-keeping and compliance.6. In conclusion, the Application was admitted, and the moratorium period came into effect, signaling the beginning of Corporate Insolvency Resolution Process against the Corporate Debtor. All parties involved were duly informed of the Tribunal's decision for further actions and compliance.