Tribunal Admits Creditor's Insolvency Application: Debt Valid, Privity of Contract Confirmed

The Tribunal admitted the Operational Creditor's application under Section 9 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process against the Corporate Debtor. The Tribunal found the debt valid, rejected the assignment of the contract to a third party without consent, confirmed the continued privity of contract between the parties, and determined that the application was within the period of limitation. As the Corporate Debtor did not dispute the debt or raise any pre-existing disputes, the Tribunal declared a default in payment and appointed an Interim Resolution Professional to oversee the CIRP proceedings.

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Issues Involved:
1. Existence and Validity of Debt
2. Assignment of Contract
3. Privity of Contract
4. Period of Limitation
5. Default and Admission of Debt
6. Initiation of Corporate Insolvency Resolution Process (CIRP)

Detailed Analysis:

1. Existence and Validity of Debt:
The Operational Creditor performed post-tensioning works for the Corporate Debtor under an Agreement dated 10th September 2008. The Corporate Debtor accepted the services without any protest, and running bills were raised accordingly. After adjusting payments, a principal amount of Rs.17,72,655/- remained due. The Operational Creditor issued a demand notice on 9th August 2019, which the Corporate Debtor received on 13th August 2019. The Corporate Debtor's response did not dispute the amount claimed.

2. Assignment of Contract:
The Corporate Debtor argued that the contract was assigned to Barnaparichay Book Mall Pvt. Ltd. on 6th August 2009, and thus, all payments were to be made by Barnaparichay. However, the Operational Creditor denied accepting any such assignment, stating that any transfer of liabilities without its consent is void. The Tribunal relied on the Supreme Court's decision in Kapilaben and Ors. v. Ashok Kumar Jayantilal Sheth, which established that obligations under a contract cannot be assigned without the consent of the other party.

3. Privity of Contract:
The Tribunal found that the privity of contract between the Operational Creditor and the Corporate Debtor never ended. The Operational Creditor consistently raised bills directly against the Corporate Debtor, and part payments were made by the Corporate Debtor, indicating acknowledgment of the debt. The Corporate Debtor's attempt to transfer liabilities to Barnaparichay without the Operational Creditor's consent was deemed invalid.

4. Period of Limitation:
The Tribunal noted that the 28th RA Bill was raised on 31st December 2015, and subsequent confirmations of outstanding amounts were made by Barnaparichay on various dates, including 16th May 2018. This confirmed that the application was within the period of limitation.

5. Default and Admission of Debt:
The Corporate Debtor did not dispute the execution of work by the Operational Creditor. The demand notice issued under Section 8 of the IBC was served on the Corporate Debtor, and no pre-existing disputes were raised in the reply. The Tribunal found that there was a clear default in payment of the outstanding operational debt by the Corporate Debtor.

6. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Tribunal admitted the application filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016. A moratorium under Section 14 of the IBC was declared, and an Interim Resolution Professional (IRP) was appointed to carry out the CIRP functions. The Operational Creditor was directed to deposit Rs. 2,00,000/- with the IRP for expenses related to issuing public notices and inviting claims.

Conclusion:
The Tribunal concluded that the application was complete and admitted the petition for initiating CIRP against the Corporate Debtor. The privity of contract remained between the Operational Creditor and the Corporate Debtor, and the assignment of contract to Barnaparichay without consent was invalid. The Corporate Debtor was found to be in default of its payment obligations, and the CIRP process was initiated accordingly.

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