Tribunal Admits CIRP Application, Declares Moratorium

The Tribunal admitted the application for initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, appointed an Interim Resolution Professional (IRP), declared a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, and directed compliance with relevant provisions. The Tribunal found the application timely filed within the limitation period, rejected the Corporate Debtor's arguments on payment defaults and pre-existing disputes, and authorized the Operational Creditor to proceed with the resolution process.

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Issues Involved:
1. Application for initiation of Corporate Insolvency Resolution Process (CIRP)
2. Alleged default by Corporate Debtor
3. Limitation period for claims
4. Right to payment and breach of contract
5. Pre-existence of dispute
6. Appointment of Interim Resolution Professional (IRP)
7. Declaration of moratorium

Detailed Analysis:

1. Application for initiation of Corporate Insolvency Resolution Process (CIRP):
The application was filed by the Operational Creditor, seeking to initiate CIRP under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor for an alleged default in clearing a debt of Rs. 81,93,330/- for goods provided. The Operational Creditor claimed that the Corporate Debtor had given purchase orders for Kraft Paper Reels, which were supplied through various manufacturers as per the Corporate Debtor's instructions.

2. Alleged default by Corporate Debtor:
The Operational Creditor asserted that the Corporate Debtor had not paid for the supplied Kraft Paper Reels, resulting in an outstanding amount. The Corporate Debtor, however, contended that payments were made for the purchase orders and that the Operational Creditor's claim included invoices that were either time-barred or already paid.

3. Limitation period for claims:
The Corporate Debtor argued that the application was barred by limitation as the invoices were prior to January 2015. The Tribunal found that the parties had a continuous running account and business relationship, with the last sale invoice dated 15.09.2017 and the last payment made on 23.01.2018. The application filed on 07.11.2019 was thus within the limitation period.

4. Right to payment and breach of contract:
The Corporate Debtor claimed that the Operational Creditor did not have the right to payment or remedy for breach of contract as the goods were supplied through third-party manufacturers. However, the Operational Creditor provided 'Payment Authority Letters' authorizing it to receive payments on behalf of these manufacturers, establishing its right to claim payment.

5. Pre-existence of dispute:
The Corporate Debtor raised the issue of pre-existing disputes, including proceedings under Section 138 of the Negotiable Instruments Act. However, the Tribunal noted that no documentary proof of any dispute regarding account reconciliation or material supplied was submitted by the Corporate Debtor. The Corporate Debtor's offer of Rs. 30,00,000/- for settlement during the hearing of the Section 138 complaint further indicated the absence of a genuine dispute.

6. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Aishwarya Mohan Gahrana as the IRP, directing him to take necessary steps under Sections 15, 17, and 18 of the Code and file his report within 30 days. The Applicant was instructed to deposit Rs. 2 lakhs for the IRP's immediate expenses, to be reimbursed as CIRP costs.

7. Declaration of moratorium:
A moratorium was declared under Section 14 of the Code, prohibiting:
- Institution or continuation of suits or proceedings against the Corporate Debtor.
- Transferring, encumbering, or disposing of the Corporate Debtor's assets.
- Actions to foreclose or enforce security interests.
- Recovery of property by owners or lessors.

The Tribunal clarified that licenses, permits, registrations, and similar grants would not be suspended or terminated due to insolvency, provided there was no default in current dues. The moratorium would not apply to transactions notified by the Central Government or the supply of essential goods or services.

Conclusion:
The Tribunal admitted the application for initiating CIRP against the Corporate Debtor, appointed an IRP, declared a moratorium, and directed necessary actions to be taken as per the Insolvency and Bankruptcy Code, 2016.

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