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Tribunal admits Company Petition for Insolvency; appoints Resolution Professional, declares moratorium The Tribunal admitted the Company Petition, initiating the Corporate Insolvency Resolution Process against the Corporate Debtor based on the default in ...
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Tribunal admits Company Petition for Insolvency; appoints Resolution Professional, declares moratorium
The Tribunal admitted the Company Petition, initiating the Corporate Insolvency Resolution Process against the Corporate Debtor based on the default in payment and the acknowledgment of the advance amount as operational debt, following a broad interpretation of operational debt as per a Supreme Court judgment. An Interim Resolution Professional was appointed, and a moratorium was declared in accordance with the Insolvency and Bankruptcy Code, with directions for cooperation from Directors, Promoters, and associated individuals.
Issues: Initiation of Corporate Insolvency Resolution Process based on default committed by the Corporate Debtor against the Operational Creditor for a due debt amount.
Analysis: The petition was filed by the Operational Creditor (OC) against the Corporate Debtor (CD) seeking to initiate the Corporate Insolvency Resolution Process (CIRP) due to a default in payment. The OC issued a work order to the CD for the purchase of goods, remitting an advance payment of Rs. 1 Crore. However, the CD failed to supply the goods and did not refund the advance amount, leading to the petition for CIRP initiation.
The CD admitted receiving the advance payment and the value of the purchase order but objected to the maintainability of the Company Petition, arguing that the debt arising from advance payment does not qualify as an operational debt under Section 5(21) of the IBC, 2016. The CD contended that the debt does not fall under the definition of operational debt, challenging the petition on this ground.
The OC's counsel referenced a Supreme Court judgment that clarified advance payments for services to be rendered also constitute operational debt, expanding the definition under the IBC. The Court's ruling emphasized a broad interpretation of operational debt, including those who provide or receive operational services from the corporate debtor, leading to an operational debt. The CD did not object to this interpretation, leading to the acknowledgment of the debt and admission of the advance amount as operational debt.
Based on the Supreme Court judgment and the acknowledgment of debt, the Tribunal admitted the Company Petition, initiating the Corporate Insolvency Resolution Process against the CD. An Interim Resolution Professional was appointed to manage the CD's affairs, and a moratorium was declared in accordance with the Insolvency and Bankruptcy Code. The Directors, Promoters, and associated individuals were directed to cooperate with the IRP, and the order was communicated to all relevant parties for compliance.
In conclusion, the Tribunal admitted the Company Petition, initiating the Corporate Insolvency Resolution Process against the Corporate Debtor based on the default in payment and the acknowledgment of the advance amount as operational debt, as per the Supreme Court's interpretation.
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