2021 (8) TMI 606 - Tri - Insolvency and Bankruptcy

Tribunal admits CIRP petition against Corporate Debtor for debt default, appoints IRP, imposes moratorium

The tribunal admitted the petition, initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to default in payment of ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Existence of debt and dispute or not - claims barred by limitation or not - HELD THAT:- The bench is of the view that minor defects which have arisen during the completion of project were adequately attended to by the petitioner and no dispute existed at the time of the filing of the petition. Time limitation of claims - HELD THAT:- The respondent mentioned that the debt was due on 28.07.2015 and the company petition was preferred in October 2018, therefore, it is after a period of 3 years, therefore, it is hit by limitation. In this regard, the petitioner has mentioned that in the running account, the last invoice was raised by the petitioner on 26.06.2015 and ordinarily the limitation period would have expired 3 years from the due date. However, since the respondent had issued two unequivocal admission of its liability by way of sharing respondent’s books of accounts on 19.10.2015 and again on 22.03.2017 with the petitioner, it amounts to admission of liability. The bench notes that it is established rule that when a party issues acknowledgment of its liability in writing the period of limitation starts afresh. Therefore, the Bench has no doubt that the respondent unequivocal admission of liability negates the contention of the petitioner that the claim is time barred - the Bench is of clear view that there is a debt in terms of Section 5(21) of Code and there is a default in terms of Section 3(12) of Code are clearly established and the debt is also within limitation. Thus, the present Company Petition satisfies all the necessary requirement for admission. Petition admitted - moratorium declared. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP)2. Default in payment of debt3. Admissibility of the petition considering the limitation period4. Existence of a dispute between the parties5. Requirement of a certificate from financial institutions6. Interest calculation under MSME ActIssue-wise Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP):The petition was filed by the Operational Creditor under Sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016, to initiate CIRP against the Corporate Debtor for defaulting on payment. The tribunal admitted the petition, ordering the initiation of CIRP against the Corporate Debtor.2. Default in Payment of Debt:The Operational Creditor claimed an outstanding amount of Rs. 1,83,58,490, including interest. The Corporate Debtor admitted liability for Rs. 1,29,27,018 but disputed the additional interest claimed. The tribunal noted that the Corporate Debtor had acknowledged its liability through ledger statements and emails, confirming the debt owed to the Operational Creditor.3. Admissibility of the Petition Considering the Limitation Period:The Corporate Debtor argued that the petition was time-barred as it was filed more than three years after the debt became due. However, the tribunal found that the Corporate Debtor's acknowledgments of liability in October 2015 and March 2017 reset the limitation period, making the petition admissible.4. Existence of a Dispute Between the Parties:The Corporate Debtor contended that there were ongoing disputes regarding the quality of work and delays by the Operational Creditor. The tribunal examined the evidence and concluded that the disputes raised were minor and had been addressed, thus no substantial dispute existed at the time of filing the petition.5. Requirement of a Certificate from Financial Institutions:The Corporate Debtor argued that the petition should be dismissed due to the absence of a certificate from financial institutions confirming the unpaid operational debt. The tribunal did not find this argument sufficient to reject the petition, as the debt and default were clearly established.6. Interest Calculation Under MSME Act:The Operational Creditor, being an MSME, claimed interest at 18% per annum under the MSME Act. The tribunal acknowledged the entitlement to interest but focused on the principal debt and the Corporate Debtor's admission of liability, which was sufficient for the petition's admission.Order:The tribunal admitted the petition, initiating CIRP against the Corporate Debtor. An Interim Resolution Professional (IRP) was appointed, and the Operational Creditor was directed to deposit Rs. 5 Lakh for the initial CIRP cost. The tribunal also imposed a moratorium on suits, proceedings, and actions against the Corporate Debtor's assets, ensuring the continuation of essential services during the CIRP period. The management of the Corporate Debtor was vested in the IRP, and the order was communicated to the Registrar of Companies for updating the Corporate Debtor's Master Data.