Tribunal admits petition for Corporate Insolvency Resolution Process due to operational debt default

The Tribunal admitted the petition filed by the Operational Creditor to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to the operational debt exceeding the pecuniary threshold limit and a default on the part of the Corporate Debtor. The Tribunal found the applicant's claim for interest valid, imposed a moratorium, and appointed an Interim Resolution Professional (IRP) to manage the affairs of the Corporate Debtor in accordance with the Insolvency and Bankruptcy Code. Compliance and communication with relevant authorities were also directed for proper execution of the proceedings.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Existence of Operational Debt
3. Pre-existing Dispute
4. Unilateral Imposition of Interest
5. Moratorium and Appointment of Interim Resolution Professional (IRP)

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petition was filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, to initiate CIRP against the Corporate Debtor. The Tribunal found that the operational debt exceeded the pecuniary threshold limit of Rs. 1 crore as envisaged under Section 4 of the Code, 2016, and there was a default on the part of the Corporate Debtor in pursuance of invoices raised by the applicant. Consequently, the petition was admitted, and CIRP was ordered to be initiated against the Corporate Debtor.

2. Existence of Operational Debt:
The applicant claimed an outstanding debt amounting to Rs. 4,77,73,937/-, including the principal amount of Rs. 2,21,38,643/- and interest of Rs. 2,56,35,294/-. The Tribunal observed that the applicant had issued two demand notices, the first on 09.10.2020 and the second on 25.11.2021. The first demand notice was withdrawn after part payment by the Corporate Debtor and issuance of post-dated cheques, which were later dishonored. The Tribunal emphasized that the second demand notice was based on pending invoices and account statements, not on breach of settlement terms, and thus constituted an operational debt.

3. Pre-existing Dispute:
The Corporate Debtor contended that there was a pre-existing dispute regarding the arbitrary and exorbitant charges levied by the applicant. However, the Tribunal noted that the Corporate Debtor continued placing orders and receiving goods even after discovering the alleged exorbitant charges in June 2020. Additionally, the Corporate Debtor failed to provide any correspondence or documents showing a dispute before the issuance of the second demand notice. The Tribunal concluded that the contention of a pre-existing dispute was unsupported by evidence and was overruled.

4. Unilateral Imposition of Interest:
The Corporate Debtor argued against the unilateral imposition of interest at 24% per annum. The Tribunal found that the invoices explicitly contained a provision for charging interest at 24% per annum if payments were not made within the stipulated time. Citing relevant judgments, the Tribunal held that the total amount for the maintainability of the claim includes both the principal debt and interest on delayed payments as stipulated in the invoices. Thus, the applicant's claim for interest was valid and the Corporate Debtor's contention was rebutted.

5. Moratorium and Appointment of Interim Resolution Professional (IRP):
The Tribunal declared a moratorium in terms of Section 14 of the Code, imposing prohibitions on suits, transferring assets, and other specified actions against the Corporate Debtor. Mr. Pradeep Kumar was appointed as the IRP, subject to no pending disciplinary proceedings against him. The applicant was directed to deposit Rs. 2 lacs with the IRP to meet the expenses of performing assigned functions. The IRP was tasked with protecting and preserving the value of the Corporate Debtor's property and managing its affairs in accordance with the Code, Rules, and Regulations.

The Tribunal's order also included directions for compliance and communication with relevant authorities, including the IBBI and ROC, to ensure proper execution and documentation of the proceedings.

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