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: GGPL missed to mention the name of Interim Resolution Professional (IRP) in its application. Can this mistake lead to rejection of their application?

Answer & Explanation:

According to section 9(4) of the Insolvency & Bankruptcy Code, an operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional. GGPL may propose a resolution professional to act as an interim resolution professional. However, being an operational creditor, it is not mandatory for them to propose a name. According to section 16 (3) of the Code, in such cases where no proposal for an interim resolution professional is made, the Adjudicating Authority shall make a reference to the Insolvency and Bankruptcy Board of India for the recommendation of the name of insolvency professional who may act as an interim resolution professional. Therefore, this mistake will not lead to rejection of their application.

Topics: Corporate Insolvency Resolution Process (CIRP)

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