Corporate Insolvency Resolution Process initiated for unpaid invoices under Insolvency & Bankruptcy Code

The Tribunal initiated the Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency & Bankruptcy Code, 2016 against the Corporate Debtor based on the Operational Creditor's claim for unpaid invoices and operational debt. Despite acknowledging the debt, the Corporate Debtor failed to pay due to market conditions. An Insolvency Professional was appointed, a moratorium declared, and compliance measures outlined. The Tribunal stressed adherence to IBC procedures for effective resolution of insolvency proceedings.

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Issues:
Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency & Bankruptcy Code, 2016 based on operational debt claim.

Detailed Analysis:

1. Operational Creditor's Claim: The Operational Creditor sought to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for unpaid invoices and operational debt. The Operational Creditor provided construction/project management consultancy services under an agreement, raised invoices, and even received a residential unit in lieu of payment. The Corporate Debtor acknowledged the debt but failed to pay, leading to the demand notice and subsequent petition under Section 9 of the IBC, 2016.

2. Corporate Debtor's Defense: The Corporate Debtor admitted the debt but cited reasons for non-payment, including delays caused by external factors such as EPCAJ NGT Orders and the impact of the COVID-19 pandemic on the real estate sector. Despite acknowledging the liability, the Corporate Debtor failed to settle the outstanding amount due to adverse market conditions affecting the real estate business.

3. Adjudication and Decision: The Tribunal reviewed the submissions of both parties and noted the admitted liability of the Corporate Debtor towards the Operational Creditor. As the debt remained unpaid, the Tribunal found no pre-existing dispute and fulfilled conditions for admitting the Section 9 petition. Consequently, the Tribunal decided to initiate the CIR Process for the Corporate Debtor and admitted the petition.

4. Appointment of Insolvency Professional: The Tribunal appointed an Insolvency Professional as the Interim Resolution Professional to manage the affairs of the Corporate Debtor during the CIRP. The appointed professional was directed to comply with statutory requirements, including making public announcements and inviting claims from creditors.

5. Moratorium and Prohibitions: A moratorium was declared from the date of the order until the completion of the CIRP, prohibiting various actions such as instituting suits, transferring assets, enforcing security interests, and recovering property. Essential supplies to the Corporate Debtor were protected during this period, and specific compliance requirements were outlined for the IRP and corporate management.

6. Compliance and Reporting: The Operational Creditor was instructed to provide a copy of the order to the IRP for taking charge of the Corporate Debtor's assets and ensuring compliance with the order. Additionally, the Registry was directed to inform the Registrar of Companies for updating the Corporate Debtor's status on the Ministry of Corporate Affairs website.

7. Conclusion: The Tribunal delivered the order in a virtual hearing, emphasizing the initiation of CIRP based on the admitted operational debt and the necessity to follow the prescribed procedures under the IBC, 2016 for effective resolution of the insolvency proceedings.

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