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2019 (3) TMI 1593 - Tri - Insolvency and Bankruptcy
Initiation of Corporate Insolvency Resolution Process - Corporate Debtor failed to pay an outstanding amount - HELD THAT - It is a settled position of law that the provisions of Code cannot be invoked for recovery of outstanding amount but it can be invoked to initiate CIRP for justified reasons as per the Code. The Honble Supreme Court in the case of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED 2017 (9) TMI 1270 - SUPREME COURT has inter alia held that IBC 2016 is not intended to be substitute to a recovery forum - The Honble Supreme Court in B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES 2018 (10) TMI 777 - SUPREME COURT has inter alia held that provisions of Limitation Act will apply to proceedings or appeals before NCLT/NCLAT. Section 238A of the Code make provisions of Limitation Act would apply to proceedings under the Code. In the instant petition in light of the discussion on the proposition of law entailed in the preceding paragraphs and considering the circumstances of the case. We are satisfied that the default in question has occurred there is no existence of dispute and the petition filed under Section 9 of Code 2016 is complete and there are no disciplinary proceedings pending against the proposed resolution professional Mr. Addanki Haresh pursuant to the written confirmation provided by the proposed resolution professional in Form-2 under Rule 9 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016. The present petition deserves to be admitted and to initiate CIRP - application admitted.
Issues:
Initiation of Corporate Insolvency Resolution Process (CIRP) due to outstanding debt.
Validity of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016.
Existence of dispute and default in payment.
Application of Limitation Act to insolvency proceedings.
Admission of the petition and appointment of Insolvency Resolution Professional.
Issue 1: Initiation of Corporate Insolvency Resolution Process (CIRP) due to outstanding debt
The case involved a petition filed by the Operational Creditor seeking to initiate the CIRP against the Corporate Debtor for failing to pay an outstanding amount. The Corporate Debtor acknowledged the debt but disputed the interest amount claimed by the Operational Creditor. The Corporate Debtor expressed readiness to settle the outstanding amount within a specified timeframe. The Tribunal considered the financial condition of the Corporate Debtor and the absence of efforts to settle the debt, leading to the admission of the petition to initiate CIRP.
Issue 2: Validity of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016
The Operational Creditor filed the petition under Section 9 of the Code, asserting the default in payment by the Corporate Debtor. The Tribunal noted that the petition was filed within the statutory period from the date of default, as per the provisions of the Code. The Corporate Debtor raised objections regarding the quality of goods supplied and the timeliness of the petition, claiming it was time-barred. However, the Tribunal found the petition valid and complete, leading to the admission of the petition to initiate CIRP.
Issue 3: Existence of dispute and default in payment
The Corporate Debtor acknowledged the debt owed to the Operational Creditor but disputed the interest amount claimed. The Corporate Debtor raised concerns about the quality of goods supplied and communicated its intent to settle the outstanding amount within a specified timeframe. Despite the acknowledgment of the debt, the Corporate Debtor did not make efforts to settle the debt, leading to the Tribunal's decision to admit the petition and initiate CIRP.
Issue 4: Application of Limitation Act to insolvency proceedings
The Tribunal considered the applicability of the Limitation Act to insolvency proceedings, citing relevant judgments by the Hon'ble Supreme Court. It emphasized the need for the existence of an undisputed debt as a prerequisite for initiating CIRP. The Tribunal evaluated the facts of the case in light of the Supreme Court decisions and determined that the petition met the criteria for admission to initiate CIRP.
Issue 5: Admission of the petition and appointment of Insolvency Resolution Professional
After analyzing the submissions and circumstances of the case, the Tribunal concluded that the default had occurred, there was no dispute, and the petition was complete. The Tribunal appointed an Insolvency Resolution Professional to conduct the CIRP and issued directions to enforce a moratorium on legal actions against the Corporate Debtor. The Tribunal directed cooperation between the parties and the IRP, setting a timeline for further proceedings and reporting.
This detailed analysis covers the key issues addressed in the judgment, providing a comprehensive overview of the legal aspects and decisions made by the Tribunal.