Ruby and Emerald Pvt. Ltd (REPL), incorporated on 1 st April, 2013 has its registered office in Surat. Gems and Gems Pvt. Ltd (GGPL), incorporated on 11 th September, 2014 has its registered office in Jaipur. REPL was ap

CS Professional · Insolvency - Law and Practice · PYQS · December 2022
Ruby and Emerald Pvt. Ltd (REPL), incorporated on 1 st April, 2013 has its registered office in Surat. Gems and Gems Pvt. Ltd (GGPL), incorporated on 11 th September, 2014 has its registered office in Jaipur. REPL was approached by GGPL for procuring its goods which can be used as raw material in the factory of REPL. It was agreed through a contract between REPL and GGPL that upon procurement of the goods entire payment shall be made by REPL within 10 days of issuance of the tax invoice. The transaction was smoothly going between REPL and GGPL without any delays in supply of goods and payment. Owner of REPL died due to cardiac arrest and the business operations of REPL were severely affected. REPL started supplying faulty goods to its customers and the quality of raw material being supplied by the suppliers also deteriorated gradually. As on 2 nd January, 2021, there were no dues outstanding towards GGPL and balance confirmation from GGPL was also taken by REPL. However, between 3 rd January, 2021 and 31 st May, 2021 various transactions happened between REPL and GGPL. GGPL requested for the payments multiple times for such transaction between 3 rd January, 2021 and 31 st May, 2021; however, GGPL kept supplying goods in good faith based on relationship with REPL. REPL neither responded to requests of GGPL nor stopped buying goods from them. Because of the long overdue from REPL, GGPL sent a demand notice on 16 th June, 2021 through their lawyer to make the payment of entire outstanding to the tune of ₹ 1,25,00,000/- exclusive of interest @ 15% p.a. within 10 days from the receipt of the notice, failing which GGPL will take suitable actions under the law. No communication whatsoever was received from REPL. Therefore, as per the directions of the lawyer, GGPL filed an application to initiate Corporate Insolvency Resolution Process (CIRP) against REPL. Also, they have sent a letter to the power company to disconnect the supply of electricity to REPL considering that they are not in a position to pay their dues. Considering the above facts answer the following questions: State whether GGPL can file an application to initiate CIRP against REPL. State the documents that are required to be attached with such application as per Insolvency and Bankruptcy Code, 2016.

Answer & Explanation:

Pursuant to provisions of section 4 of the Insolvency & Bankruptcy Code prescribing minimum default of ₹ one crore for initiating CIRP by a financial creditor, operational creditor or corporate debtor, Gems and Gems Pvt. Ltd (GGPL) being an operational creditor, intends to initiate the Corporate Insolvency Resolution Process (CIRP) against Ruby and Emerald Pvt. Ltd (REPL), can file an application under section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code) before the National Company Law Tribunal (NCLT) considering that their dues exceed ₹ 1 crore. Section 9 provides that after the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under subsection (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process. According to Section 9 of the Insolvency & Bankruptcy Code, an application for initiation of corporate insolvency resolution process by the operational creditor shall be filed in such form and manner and accompanied with such fee as may be prescribed. GGPL shall along with the application furnish the following documents: A copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor; An affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt; A copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available; A copy of any record with information utility confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available; and Any other proof confirming that there is no payment of any unpaid operational debt by the corporate debtor or such other information, as may be prescribed.

Topics: Corporate Insolvency Resolution Process (CIRP)

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