2018 (5) TMI 1832 - Tri - Insolvency and Bankruptcy

Tribunal asserts jurisdiction, admits insolvency application, imposes moratorium, appoints IRP

Oriental Bank of Commerce Versus Bindals Sponnge Industries Ltd.

The Tribunal confirmed jurisdiction over the respondent-corporate debtor, admitted the application under section 7(5)(a) of the Insolvency and Bankruptcy ... Corporate insolvency resolution process - outstanding debt - HELD THAT:- In the case in hand there is no dispute that the respondent-company has committed default in repayment of the outstanding amount. Moreover, the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant-financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been a default in payment of the financial debt. As a sequel to the above discussion and in terms of section 7(5)(a) of the Code, the present application is admitted. Issues Involved:1. Jurisdiction of the Tribunal.2. Authorization and completeness of the application.3. Evidence of financial debt and default.4. Objections raised by the respondent.5. Appointment of Interim Resolution Professional (IRP).6. Declaration of moratorium.Issue-Wise Detailed Analysis:1. Jurisdiction of the Tribunal:The Tribunal confirmed its territorial jurisdiction over the respondent-corporate debtor, M/s. Bindals Sponnge Industries Ltd., as the registered office of the corporate debtor is located in Delhi. This jurisdiction is in accordance with sub-section (1) of section 60 of the Insolvency and Bankruptcy Code, 2016.2. Authorization and Completeness of the Application:The application was filed by Oriental Bank of Commerce under section 7 of the Insolvency and Bankruptcy Code, 2016, read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Mr. Petri Rama Krishna, Chief Manager (Law) of the bank, was duly authorized by a Board Resolution dated December 16, 2017, to sign and file the application. The application was complete, including the affidavit confirming the dispatch and delivery of the complete paper book to the respondent.3. Evidence of Financial Debt and Default:The applicant-bank provided substantial evidence of the financial debt and default by the corporate debtor. The corporate debtor had been granted various credit facilities by a consortium of banks, including Oriental Bank of Commerce. The outstanding amounts as of January 11, 2018, were detailed, and the corporate debtor had acknowledged these facilities and executed various security and loan documents. The corporate debtor’s account was declared NPA on June 30, 2015, following irregularities in servicing the debt, and a recall letter was issued under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.4. Objections Raised by the Respondent:The respondent raised several objections, including:- The variance in the amount of default claimed.- Lack of privity of contract between the applicant and the respondent.- Validity of Form 2 filed by the applicant.- The pending one-time settlement proposal.The Tribunal addressed these objections, stating that the variance in the amount of default is not material for the admission of the application. The Code requires only the default amount to be at least Rs. 1 lakh. The Tribunal also clarified that a financial creditor can file an application independently under section 7 of the Code, and the inter se agreement between financial creditors does not override this provision. The updated Form 2 was filed as required, and the one-time settlement proposal was rejected by the applicant-bank.5. Appointment of Interim Resolution Professional (IRP):The applicant proposed Shri Dinesh Sood as the IRP, and his appointment was confirmed as he met the requirements of section 7(3)(b) of the Code. There were no disciplinary proceedings pending against him.6. Declaration of Moratorium:The Tribunal declared a moratorium under section 14 of the Code, imposing prohibitions on:- Institution or continuation of suits or proceedings against the corporate debtor.- Transferring or disposing of any assets of the corporate debtor.- Actions to enforce any security interest.- Recovery of any property by an owner or lessor.The moratorium does not apply to transactions notified by the Central Government or the supply of essential goods or services.Conclusion:The Tribunal admitted the application under section 7(5)(a) of the Code, satisfied that the default had occurred, the application was complete, and no disciplinary proceedings were pending against the proposed IRP. The IRP was directed to make a public announcement and perform his functions as per the Code, with all personnel connected with the corporate debtor required to cooperate. The office was instructed to communicate the order to all relevant parties within seven days.