2022 (6) TMI 871 - Tri - Insolvency and Bankruptcy

Operational Creditor Wins Company Petition for CIRP Initiation

The Tribunal found in favor of the Operational Creditor in the Company Petition seeking initiation of Corporate Insolvency Resolution Process (CIRP) ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The Date of default from the due date of Invoice fell on 22.12.2014 and the Petition was filed on 01.08.2018. But it is seen from the correspondences as exchanged between the parties that the Corporate Debtor had acknowledged in its emails dated 27.03.2015, 10.09.2015, 24.09.2015 and 18.11.2015 wherein the Corporate Debtor stated that the financial condition of the Company is unstable, and they were unable to help immediately. The Corporate Debtor Company were under the process of arranging fund as they were facing huge cash flow problems - Hence, it is evident that the Corporate Debtor Company were not in a position to pay the debt and also any contentions of the Corporate Debtor were not raised/replied to the Demand Notice sent by the Operational Creditor to the Corporate Debtor dated 17.05.2018. The Operational Creditor has successfully demonstrated and proved the debt and default in this case and has also proved that there is absolutely no reason for the Corporate Debtor to hold on to the payment of the invoices. Petition admitted - moratorium declared. Issues:1. Initiation of Corporate Insolvency Resolution Process (CIRP) based on default in payment.2. Validity of the claim of the Operational Creditor against the Corporate Debtor.3. Acknowledgment of debt and its impact on the limitation period.4. Maintainability of the Company Petition on the basis of limitation.5. Evidence of default and debt by the Operational Creditor.6. Appointment of Interim Resolution Professional and initiation of CIRP process.Analysis:1. The Company Petition was filed by the Operational Creditor seeking to initiate CIRP against the Corporate Debtor for default in payment, invoking the provisions of Section 9 of the Insolvency and Bankruptcy Code, 2016. The petition claimed non-payment of a specific sum by the Corporate Debtor, backed by relevant documents such as Purchase Orders, invoices, and lorry receipts.2. The Corporate Debtor contested the claim, challenging the maintainability of the Company Petition on the grounds of limitation. The Corporate Debtor argued that the petition was filed much later than the expiry of the limitation period. They also disputed the acknowledgment of debt, stating that acknowledgments from a third party entity were not valid for extending the limitation period.3. The Operational Creditor provided evidence of default and debt through various correspondences, including emails exchanged between the parties and a Demand Notice sent to the Corporate Debtor. The Operational Creditor also submitted a Statement of Accounts to support the claim.4. The Tribunal analyzed the correspondences and acknowledgments made by the Corporate Debtor, noting that the Corporate Debtor had acknowledged the debt in various emails, indicating financial instability and inability to make immediate payments. The Tribunal found that the Corporate Debtor did not respond to the Demand Notice, further strengthening the Operational Creditor's claim.5. Based on the evidence presented, the Tribunal concluded that the Operational Creditor had successfully demonstrated the debt and default by the Corporate Debtor. Therefore, the Company Petition was deemed admissible, and the Tribunal ordered the initiation of CIRP against the Corporate Debtor. An Interim Resolution Professional was appointed, and specific directions were issued to manage the CIRP process effectively.6. The Tribunal imposed restrictions on the Corporate Debtor, including a moratorium period, prohibition on asset disposal, and continuation of essential services. The management of the Corporate Debtor was vested in the Interim Resolution Professional during the CIRP period, emphasizing the need for cooperation from directors and employees. The Tribunal also directed the Registry to communicate the order to all relevant parties promptly.