Corporate Debtor's failure to pay operational debt admitted, triggering CIRP under IBC Section 9

The Adjudicating Authority found that the Corporate Debtor had an operational debt due to the Operational Creditor, which was established as unpaid. Despite reminders and a demand notice, the Corporate Debtor failed to make further payments, leading to the admission of the debt. The debt exceeded Rs. 1 lakh, was undisputed, and the demand notice was effectively served. The Adjudicating Authority concluded that all conditions for initiating the Corporate Insolvency Resolution Process under Section 9 of the IBC were met, resulting in the dismissal of the appeal and admission of the application, triggering the CIRP without costs awarded.

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Issues Involved:
1. Whether payment to the Operational Creditor was due from the Corporate Debtor, giving rise to an operational debt.
2. Whether a default has been committed by the Corporate Debtor in respect of payment of such operational debt.
3. Whether the operational debt exceeds an amount of Rs. 1 lakh and is an undisputed debt.
4. Whether the Demand Notice was effectively served upon the Corporate Debtor.
5. Whether there was any pre-existing dispute raised by the Corporate Debtor.

Issue-Wise Detailed Analysis:

1. Operational Debt Due:
The Corporate Debtor/Appellant entered into an agreement on 08.04.2019 with the Operational Creditor/Respondent No.1 for creative outdoor advertisements. The Corporate Debtor had received an order from Air India Ltd. for printing and supply of disposable Head Rest Covers (HRC) for two years, which were to carry third-party advertisement. The Operational Creditor started supplying the HRC directly to Air India Cargo from August-November 2019. The Corporate Debtor made substantial advance payments totaling Rs.50,72,800/- to the Operational Creditor till 18.11.2019. The Corporate Debtor argued that no default in payments was made, and the Section 9 application was premature. However, the Adjudicating Authority found that the Corporate Debtor admitted that out of Rs. 65,30,168/-, only Rs. 50,72,800/- was paid, and the remaining balance was unpaid, establishing an operational debt due and payable.

2. Default in Payment:
The Operational Creditor contended that the Corporate Debtor failed to make further payments despite reminders through emails and chat communications. The Corporate Debtor did not reply to the Demand Notice nor made any payments, compelling the Operational Creditor to file the Section 9 petition. The Adjudicating Authority found ample evidence that the Operational Creditor sent reminders, and the Corporate Debtor sought time to make payments, implying an admission of the debt.

3. Amount Exceeding Rs. 1 Lakh and Undisputed Debt:
The Adjudicating Authority examined whether the operational debt exceeded Rs. 1 lakh and was undisputed. The Corporate Debtor admitted the outstanding amount, and there was no substantial evidence of a pre-existing dispute. The Mobilox judgment criteria were applied, confirming the operational debt exceeded Rs. 1 lakh, was due and payable, and no dispute existed.

4. Effective Service of Demand Notice:
The Corporate Debtor contested the effective delivery of the Demand Notice. The Adjudicating Authority found that the notice was sent to the Corporate Office of the Corporate Debtor at Gurgaon, the email ID of the Corporate Debtor, and the Director's email ID, confirming effective service. The Adjudicating Authority referred to Rule 5 of IBBI (Application to Adjudicating Authority Rules, 2016) and relevant case law, affirming the notice was duly delivered.

5. Pre-Existing Dispute:
The Corporate Debtor raised the issue of defective and sub-standard goods supplied by the Operational Creditor. However, no evidence of a pre-existing dispute was provided. The Adjudicating Authority found that the Corporate Debtor did not raise any dispute before the issuance of the Demand Notice. The Mobilox judgment criteria were applied, and it was determined that no real and substantial pre-existing dispute existed.

Conclusion:
The Adjudicating Authority concluded that all conditions necessary to trigger the Corporate Insolvency Resolution Process under Section 9 of the IBC were fulfilled:
- Existence of a debt due and its default by the Corporate Debtor.
- Delivery of a demand notice of an unpaid and undisputed debt.
- No payment of the unpaid and undisputed debt within 10 days of receipt of the demand notice.
- No real pre-existing dispute discernible.

The appeal was dismissed, and the application under Section 9 of the IBC was admitted, initiating the CIRP. No costs were awarded.

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