2021 (6) TMI 205 - Tri - Insolvency and Bankruptcy

Tribunal Admits Application for Corporate Insolvency Resolution Process

The Tribunal admitted the application under Section 9(5) of the Insolvency & Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditor - existence of debt and dispute or not - HELD THAT:- The issue which is required to be decided delves around the fact as to the Memorandum of Understanding dated 22.08.2019, wherein the parties have arrived at a consensus, in and by which the Corporate Debtor is required to pay a sum of ₹ 1.30 Crore and thereby the Corporate Debtor having paid a sum of ₹ 50 Lakh whether can now, at this point of time raise a dispute as to the remaining sum of ₹ 80 Lakh. In the present case, the Demand Notice was sent to the Corporate Debtor on 24.10.2019 and the same was received by the Corporate Debtor on 26.10.2019 and in their reply letter dated 18.11.2019, the Corporate Debtor has not brought to the notice of the Operational Creditor as to any dispute between the parties which has been raised, before the issuance of the Demand Notice. Only after the issuance of the Demand Notice on 24.10.2019, the Corporate Debtor for the first time has sought to refute the dues which is payable to the Operational Creditor - from the documents placed in support of the claim being made in Part IV of the Application, it is seen that the Corporate Debtor is liable to pay the said sum of ₹ 80 Lakh to the Operational Creditor as per the Memorandum of Understanding dated 22.08.2019 and has committed a default in payment of the same. The Operational Creditor has proved the existence of an 'Operational debt' and the Corporate Debtor has committed 'default' in the repayment of the said 'Operational debt' to the Operational Creditor and in the said circumstances we are constrained to initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor - Application admitted - moratorium declared. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency & Bankruptcy Code (IBC), 2016.2. Existence and default of operational debt.3. Dispute raised by the Corporate Debtor.4. Pecuniary jurisdiction and limitation period.5. Appointment of Interim Resolution Professional (IRP).6. Moratorium under Section 14 of IBC, 2016.Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of IBC, 2016:The application was filed by the Operational Creditor, M/s. Eco Pure Technologies Private Limited, to initiate CIRP against the Corporate Debtor, M/s. Karaipudur Common Effluent Treatment Plant Private Limited, under Section 9 of IBC, 2016. The application disclosed the details of the debt and the default amounting to Rs. 80,00,000, excluding interest, with the default date being April 2018.2. Existence and Default of Operational Debt:The Operational Creditor provided services based on an agreement dated 04.01.2016, executed on 29.03.2016. The parties mutually agreed to close the contract and settle the dues as per an agreement dated 22.08.2019, where the Corporate Debtor was to pay a final settlement of Rs. 1.30 Crore. The Corporate Debtor paid Rs. 50 Lakh but failed to pay the remaining Rs. 80 Lakh. The Operational Creditor issued a Demand Notice under Section 8 of IBC, 2016, which the Corporate Debtor received and replied to after the expiry of 10 days.3. Dispute Raised by the Corporate Debtor:The Corporate Debtor argued that their Manager colluded with the Operational Creditor to siphon funds by raising false bills. They claimed that the Operational Creditor violated contract terms and raised false bills, resulting in heavy expenditure for the Corporate Debtor. The Corporate Debtor also claimed to have paid Rs. 22.79 Crore on various bills, with only disputed bills pending. However, the Tribunal noted that the Corporate Debtor raised these disputes only after receiving the Demand Notice, which does not qualify as a 'dispute' under Section 8(2)(a) of IBC, 2016.4. Pecuniary Jurisdiction and Limitation Period:The application was filed on 10.01.2020, before the threshold limit for pecuniary jurisdiction was raised to Rs. 1 Crore on 24.03.2020. Therefore, the Tribunal had the jurisdiction to entertain the petition. The debt fell due on 05.11.2019, and the application was filed within the limitation period.5. Appointment of Interim Resolution Professional (IRP):Since the Operational Creditor did not propose an IRP, the Tribunal appointed Mr. Govindarajan M. as the IRP from the list furnished by the Insolvency and Bankruptcy Board of India (IBBI), subject to no pending disciplinary proceedings against him.6. Moratorium under Section 14 of IBC, 2016:Upon admission of the application, a moratorium was declared, prohibiting the institution or continuation of suits, transferring or disposing of assets, foreclosing or recovering security interests, and recovering property from the Corporate Debtor. The moratorium would last until the completion of the CIRP or approval of a resolution plan or liquidation order.Conclusion:The Tribunal admitted the application under Section 9(5) of IBC, 2016, initiating the CIRP against the Corporate Debtor. The Operational Creditor was directed to pay Rs. 2,00,000 to the IRP for expenses. The order was to be communicated to the Operational Creditor, Corporate Debtor, IBBI, and the Registrar of Companies.