2017 (8) TMI 1476 - Tri - Insolvency and Bankruptcy

Tribunal Admits Insolvency Application Under Bankruptcy Code: Interim Professional Appointed, Moratorium Imposed

The Tribunal admitted the insolvency application under the Insolvency and Bankruptcy Code, 2016, appointing an Interim Insolvency Resolution Professional ... Admission of insolvency application under Section 10(4)(a) of the Insolvency and Bankruptcy Code, 2016 - Completeness of petition under Section 10(3) and establishment of default - Overriding effect of the Insolvency and Bankruptcy Code vis-a -vis other recovery proceedings - Moratorium on proceedings and actions against the corporate debtor - Appointment of Interim Resolution Professional and statutory duties on initiation of corporate insolvency resolution processCompleteness of petition under Section 10(3) and establishment of default - The Application in Form-6 was complete and the corporate debtor had committed default in payment of financial and operational debts. - HELD THAT: - The Adjudicating Authority examined the contents of Form-6 and accompanying documents and found that the applicant furnished the information required by sub-section (3) of Section 10. The material on record, including account details, securities, statements and audited financial statements produced for the relevant years, demonstrated inability of the corporate debtor to discharge outstanding amounts to the financial creditor and operational creditors. Objections alleging non-production of annual financial statements for certain years were considered and rejected on perusal of the documents on record. [Paras 9, 16, 17]Application held complete under Section 10(3) and default established; petition is admissible on these grounds.Overriding effect of the Insolvency and Bankruptcy Code vis-a -vis other recovery proceedings - Pending proceedings under SARFAESI Act and before DRT not a bar to commencement of insolvency resolution - Pendency of SARFAESI proceedings or recovery proceedings before the DRT does not preclude admission of an insolvency application under the Code. - HELD THAT: - The Authority noted that initiation or continuation of action under the SARFAESI Act and proceedings before the Debt Recovery Tribunal do not constitute grounds to refuse commencement of the corporate insolvency resolution process. The Code's overriding effect (as reflected in Section 238) and its scheme permit initiation of insolvency proceedings notwithstanding parallel recovery actions. The possibility that a corporate debtor may obtain moratorium and temporarily delay other recovery proceedings was acknowledged but held not to be a ground for rejection where statutory criteria for admission are satisfied. [Paras 13, 14, 15]Pendency of other recovery proceedings is not a ground to deny admission of the insolvency application.Admission of insolvency application under Section 10(4)(a) of the Insolvency and Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional and issuance of public announcement and call for claims - Imposition and scope of moratorium on institution or continuation of proceedings against the corporate debtor - The Application is admitted under Section 10(4)(a); an Interim Insolvency Resolution Professional is appointed and moratorium under the Code is imposed with directions to issue public announcement and call for claims. - HELD THAT: - Having found the application complete and default established, the Adjudicating Authority admitted the petition under Section 10(4)(a). The Authority appointed the proposed professional as Interim Insolvency Resolution Professional and directed him to publish the statutory public announcement and invite claims in accordance with the Code and relevant regulations. The scope of the moratorium was specified consistent with the Code's provisions, prohibiting institution or continuation of suits or proceedings, transfer or disposal of assets, enforcement of security interests (including under SARFAESI), and recovery of property in possession of the corporate debtor, subject to the statutory provisos and exceptions. [Paras 18, 19, 20, 21]Application admitted; Interim Insolvency Resolution Professional appointed; moratorium ordered and public announcement/call for claims directed.Final Conclusion: The Tribunal admitted the insolvency petition filed by the corporate applicant, appointed the Interim Insolvency Resolution Professional, directed publication of the initiation of the corporate insolvency resolution process and call for claims, and ordered the statutory moratorium; pendency of SARFAESI/DRT proceedings was held not to bar admission. Issues:1. Admissibility of the insolvency application under the Insolvency and Bankruptcy Code, 2016.2. Appointment of an Interim Insolvency Resolution Professional.3. Imposition of moratorium under Section 13(1)(a) of the Code.Admissibility of the Insolvency Application:The insolvency application was filed by the Director of the Company under the provisions of the Insolvency and Bankruptcy Code, 2016. The Company had defaulted on financial debt owed to State Bank of India and operational creditors. The Financial Creditor raised objections regarding the submission of audited financial statements for the current year and the last two financial years. However, the Adjudicating Authority found that the objections were not valid as the necessary financial statements were indeed filed. The Financial Creditor also alleged that the Company was delaying recovery proceedings under the SARFAESI Act, but the pendency of such proceedings was not a ground to reject the insolvency application. The Authority concluded that the Applicant had provided all required information, and the application was admitted under Section 10(4)(a) of the Code.Appointment of an Interim Insolvency Resolution Professional:The Applicant proposed the name of CA Prem Laddha as the Interim Resolution Professional, and the Adjudicating Authority appointed him accordingly. The Interim Professional was directed to initiate the Corporate Insolvency Resolution Process, call for submission of claims, and cause a public announcement as per the relevant regulations. The Authority specified the responsibilities and powers of the Interim Professional in managing the resolution process effectively.Imposition of Moratorium under Section 13(1)(a) of the Code:The Adjudicating Authority ordered a moratorium under Section 13(1)(a) of the Code, prohibiting certain actions against the corporate debtor, including suits, asset transfers, and enforcement of security interests. Exceptions were made for the supply of essential goods or services and transactions notified by the Central Government. The moratorium was to remain in force until the completion of the Corporate Insolvency Resolution Process, subject to specific provisions. The Authority detailed the scope and limitations of the moratorium, ensuring essential operations continued while protecting the resolution process.In conclusion, the Tribunal admitted the insolvency application, appointed an Interim Insolvency Resolution Professional, and imposed a moratorium to facilitate the resolution process while safeguarding the interests of all stakeholders involved. The detailed analysis of the issues addressed in the judgment reflects the thorough consideration given to the legal and procedural aspects under the Insolvency and Bankruptcy framework.