Tribunal Admits Insolvency Application, Initiates Resolution Process, Declares Moratorium

The Tribunal admitted the application under Section 9(5) of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process against the Corporate Debtor. A moratorium was declared, prohibiting suits, asset transfers, and recovery actions against the Debtor. Mr. Arpit Kothari was appointed as the Interim Resolution Professional, with the Operational Creditor instructed to pay expenses. The Tribunal found the Corporate Debtor's dispute regarding work quality to be weak, noting the default and jurisdictional compliance. The order was communicated for further action in accordance with the IBC regulations.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Existence of an operational debt and default by the Corporate Debtor.
3. Dispute raised by the Corporate Debtor regarding the quality of work and breakage of glass.
4. Jurisdiction and limitation period for filing the application.
5. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium.

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The application was filed by an Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking to initiate the CIRP against the Corporate Debtor.

2. Existence of Operational Debt and Default:
The Operational Creditor claimed a sum of Rs. 22,49,958.60, which included a principal amount of Rs. 15,71,734 and interest at the rate of 24% per annum. The debt was supported by documents such as work orders, outstanding invoices, a work completion certificate, and mail communications acknowledging the debt. Despite the MSME council order in favor of the Operational Creditor, the Corporate Debtor failed to pay the outstanding amount.

3. Dispute Raised by the Corporate Debtor:
The Corporate Debtor contended that there was a dispute regarding the quality of work, specifically mentioning glass breakages and discrepancies in the work done. However, the Tribunal found this defense to be patently feeble. The breakage of glass was determined to be an inherent risk associated with tempered glass, not a manufacturing defect, as per the report from the glass manufacturer, Saint-Gobain. The Tribunal noted that the Corporate Debtor had issued cheques that were returned due to insufficient funds, further indicating the default.

4. Jurisdiction and Limitation Period:
The application was filed on 24.06.2019, and the last invoice date was 13.12.2016, placing the application within the limitation period. The pecuniary jurisdiction was also confirmed as the application was filed before the jurisdiction enhancement from Rs. 1 lakh to Rs. 1 crore on 24.03.2020.

5. Appointment of Interim Resolution Professional (IRP) and Declaration of Moratorium:
Since the Operational Creditor did not propose the name of an IRP, the Tribunal appointed Mr. Arpit Kothari as the IRP. The moratorium under Section 14 of the IBC was declared, which included prohibitions on the institution or continuation of suits, transferring assets, and recovery actions against the Corporate Debtor. The Tribunal directed the Operational Creditor to pay Rs. 2,00,000 to the IRP for expenses.

Conclusion:
The Tribunal admitted the application under Section 9(5) of the IBC, 2016, and initiated the CIRP against the Corporate Debtor. The moratorium came into effect immediately, and the IRP was directed to take necessary actions as per the IBC regulations. The order was communicated to relevant parties and authorities for further proceedings.

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