2021 (10) TMI 1038 - Tri - Insolvency and Bankruptcy

Tribunal Upholds IBC Demand Notice Service & Operational Debt Ruling

The Tribunal found that the demand notice under Section 8 of the IBC was properly served as the Corporate Debtor responded, initiating the Corporate ... Demand notice under the Insolvency and Bankruptcy Code, 2016 (Section 8) duly served - pre-existing dispute - limitation and acknowledgment of debt - operational debt and default exceeding statutory threshold - admission under the Insolvency and Bankruptcy Code, 2016 (Section 9) and declaration of moratorium (Section 14) - appointment of Interim Resolution Professional and duties of IRPDemand notice under the Insolvency and Bankruptcy Code, 2016 (Section 8) duly served - Service of the demand notice dated 21.06.2018 on the corporate debtor - HELD THAT: - The Tribunal examined the record and noted that the corporate debtor replied to the Demand Notice on 29.06.2018, and the operational creditor responded to that reply on 11.07.2018. On this basis the Bench held that the contention of non-delivery of the Demand Notice was untenable and that the demand notice had been duly served on the corporate debtor. [Paras 12]Demand notice dated 21.06.2018 was properly served.Pre-existing dispute - Whether the operational debt was a pre-existing dispute precluding admission - HELD THAT: - The corporate debtor raised objections regarding quality of supplied raw material and debit notes, but these objections were first asserted only after issuance of the Demand Notice dated 21.06.2018. The corporate debtor failed to demonstrate that any dispute had been raised prior to the demand notice. Consequently, the Tribunal held that the objections did not amount to a pre-existing dispute sufficient to defeat the petition under the Code. [Paras 13]No pre-existing dispute was established; the dispute raised post-demand notice cannot defeat the petition.Limitation and acknowledgment of debt - Whether the petition was filed within time having regard to invoices and acknowledgement of debt - HELD THAT: - Although many invoices related to 2014-2015, the corporate debtor issued a balance confirmation letter dated 31.03.2016 acknowledging a debt of Rs. 93,05,491/-. The Tribunal found that this acknowledgment brought the claim within limitation for the purposes of initiation of insolvency proceedings and therefore the petition was within the period of limitation. [Paras 14]The petition is within limitation owing to the corporate debtor's acknowledgment of debt.Operational debt and default exceeding statutory threshold - admission under the Insolvency and Bankruptcy Code, 2016 (Section 9) and declaration of moratorium (Section 14) - appointment of Interim Resolution Professional and duties of IRP - Whether the petition established default of operational debt above the statutory threshold and the resultant admission, moratorium and appointment of IRP - HELD THAT: - The Tribunal reviewed the application in Form 1, accompanying invoices, ledger, dishonoured cheques and a computation summary showing an unpaid operational debt. It concluded that the petitioner had proved the existence of operational debt and default exceeding Rs. 1 lakh. Consequent upon these findings and the completeness of the petition, the Bench admitted the petition under Section 9 of the IBC, directed declaration of moratorium under Section 14 and appointed Mr. Alok Kaushik as Interim Resolution Professional, subject to filing of Form 2 within one week, directing the IRP to perform statutory functions including collation of claims and constitution of the Committee of Creditors. [Paras 15, 16, 17]Petition admitted under Section 9; moratorium declared under Section 14; Mr. Alok Kaushik appointed as Interim Resolution Professional with directions to perform IRP duties.Final Conclusion: The Tribunal admitted the Section 9 petition after finding the demand notice duly served, no pre-existing dispute, and a timely acknowledged operational debt with default exceeding the statutory threshold; moratorium was declared and an Interim Resolution Professional was appointed to proceed with the CIRP. Issues:1. Proper service of demand notice under Section 8 of the IBC.2. Dispute regarding operational debt.3. Filing of Corporate Petition (CP) within the limitation period.Issue 1: Proper service of demand notice under Section 8 of the IBC:The petition was filed under Section 9 of the IBC for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The demand notice under Section 8 of the IBC was sent to the registered address of the Corporate Debtor, and the Corporate Debtor replied to the demand notice. The Tribunal held that the demand notice was duly served as the Corporate Debtor responded to the notice, establishing proper service.Issue 2: Dispute regarding operational debt:The Corporate Debtor raised objections regarding the quality of material supplied by the Operational Creditor, but these objections were raised after the issuance of the demand notice. The Tribunal found that the dispute was raised for the first time after the service of the demand notice, indicating it was not a pre-existing dispute. Therefore, this issue was held in favor of the Operational Creditor.Issue 3: Filing of Corporate Petition (CP) within the limitation period:The invoices and lorry receipts provided as evidence pertained to the years 2014 and 2015, while the CP was filed in 2018. However, the Corporate Debtor had acknowledged the debt in a balance confirmation letter dated 31.03.2016. The Tribunal found that the CP was filed within the limitation period based on the acknowledgment of the debt by the Corporate Debtor.The Tribunal admitted the petition under Section 9 of the IBC, declaring a moratorium in accordance with Section 14 of the Code. Various prohibitions were imposed during the moratorium period, including restrictions on legal actions against the Corporate Debtor and disposal of its assets. The Tribunal appointed an Interim Resolution Professional (IRP) and directed the IRP to take necessary steps under the IBC. The IRP was tasked with constituting a Committee of Creditors and submitting progress reports to the Tribunal regularly. The order was communicated to both parties, with the counsel instructed to provide a copy to the IRP promptly. The Registry was also directed to send a copy of the order to the IRP via email without delay.