2022 (5) TMI 1205 - Tri - Insolvency and Bankruptcy

Tribunal Admits Insolvency Application Against Jewelry Company: Key Steps and Implications

The Tribunal admitted the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, filed by a jeweler against a jewelry company for ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- There is a clear admission of the corporate debtor in its reply that the default has occurred and it is unable to make payments due to lack of funds. Therefore, it is most appropriate that CIRP must be initiated and the management of the company shall be vested in the hands of a professional agency. The Scheme of the code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Apparently, since there is no dispute raised by the Corporate Debtor, in fact the corporate debtor has clearly admitted that a default has occurred. This bench is of the view that the prayer of the applicant deserves to be allowed. This Tribunal is of the affirm view that there was default on the part of the respondent in pursuance of invoices raised on behalf of the applicant, accordingly, the present application stands admitted in terms of Section 9(5) of the Code and CIRP is hereby ordered to be initiated against the respondent Corporate Debtor, forthwith. Application admitted - moratorium declared. Issues:1. Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for triggering Corporate Insolvency Resolution Process.2. Failure of the Corporate Debtor to clear outstanding dues leading to the demand for payment.3. Dispute regarding default raised by the Corporate Debtor.4. Evidence provided by the applicant to support the claim.5. Admission of default by the Corporate Debtor.6. Initiation of Corporate Insolvency Resolution Process (CIRP) and appointment of Interim Resolution Professional.7. Direction for the applicant to deposit funds with the Interim Resolution Professional.8. Imposition of moratorium on the corporate debtor.Analysis:1. The applicant, a jeweler, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking to trigger the Corporate Insolvency Resolution Process against the Corporate Debtor, a jewelry company, due to non-payment of outstanding dues. The applicant provided details of oral purchase orders, supply of goods, and invoices issued, totaling to Rs. 1,02,87,799/-, which the Corporate Debtor failed to pay despite repeated requests.2. The Corporate Debtor, in its reply, admitted the default, attributing it to business conditions and financial crisis, acknowledging the inability to pay due to lack of funds. The applicant submitted invoices and bank statements as evidence to support the claim of default. With no dispute raised by the Corporate Debtor, the Tribunal found merit in the applicant's prayer for initiating the CIRP.3. Considering the admission of default and lack of funds by the Corporate Debtor, the Tribunal ordered the initiation of CIRP against the Corporate Debtor. An Interim Resolution Professional was appointed, and the applicant was directed to deposit funds with the IRP to cover expenses. The moratorium was imposed on the Corporate Debtor as per the provisions of the Insolvency and Bankruptcy Code.4. The Tribunal emphasized the importance of the insolvency resolution process in cases of default, where debts remain unpaid. The decision to admit the application under Section 9(5) of the Code was based on the clear default on the part of the Corporate Debtor, as evidenced by the invoices and lack of payment despite demand notices.5. The order also included directions for communication to the parties involved, including the applicant, Corporate Debtor, and appointed IRP. Compliance reports were to be sent to the relevant authorities, ensuring transparency and procedural adherence in the CIRP initiation process.