2018 (9) TMI 1846 - AT - Insolvency and Bankruptcy

Tribunal Upholds Insolvency Application, Rejects Challenge on Moratorium & Debt Assignment

The Tribunal dismissed the appeal challenging the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, by the ... Initiation of Corporate Insolvency Resolution Process - Corporate Debtor - Section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The initiation of Corporate Insolvency Resolution Process cannot be annulled merely on the ground of pendency of a petition under Section 19 of ‘The Recovery of Debts Due to Banks and Financial Institutions Act, 1993’. In fact in terms of Section 14 of I&B Code all such pending proceeding cannot proceed during the period of moratorium. Learned counsel appearing on behalf of the Appellant contended that there is no debt payable. However, when we asked the counsel to file an addition affidavit signed by the Appellant making specific statement that they have not received any amount or amount received has already been paid and therefore there is no debt or there is no default, it is informed by the counsel for the Appellant that such affidavit cannot be filed by the Appellant as the Corporate Debtor had taken loan from the Bank. Appeal dismissed. Issues:1. Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Pendency of a petition under Section 19 of 'The Recovery of Debts Due to Banks and Financial Institutions Act, 1993'.3. Appellant's contention of no debt payable.4. Request for an additional affidavit to prove no debt or default.Analysis:1. The appeal was filed against the order passed by the Adjudicating Authority admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, by the assignee of debts of Corporation Bank. The order included the passing of a moratorium and the appointment of an Interim Resolution Professional. The Appellant, as the Director of the Corporate Debtor, challenged this order.2. The Appellant's counsel argued that a petition under Section 19 of 'The Recovery of Debts Due to Banks and Financial Institutions Act, 1993' was pending before the Debt Recovery Tribunal, Aurangabad. The key issue raised was the determination of whether the amount was payable to the assignee or not. However, the Tribunal clarified that the initiation of Corporate Insolvency Resolution Process cannot be annulled solely due to the pendency of another petition. Section 14 of the I&B Code mandates a moratorium on all such pending proceedings during the insolvency resolution process.3. The Appellant contended that there was no debt payable. The Tribunal requested an additional affidavit signed by the Appellant to specifically state that no amount was received or any received amount had been paid, thus proving the absence of debt or default. However, the Appellant's counsel informed the Tribunal that such an affidavit could not be filed as the Corporate Debtor had taken a loan from the Bank.4. Considering the Appellant's stance and the absence of merit in the appeal, the Tribunal declined to interfere with the impugned order dated 9th August, 2018. The appeal was dismissed without any costs imposed. This decision was based on the Appellant's inability to provide the requested affidavit and the acknowledgment of the loan taken by the Corporate Debtor from the Bank.