2019 (3) TMI 1684 - Tri - Insolvency and Bankruptcy

Insolvency Application Deemed Maintainable despite Winding-Up Petition: Appointment of Interim Resolution Professional Approved

The application under Section 7 of the Insolvency and Bankruptcy Code was deemed maintainable despite the admission of a winding-up petition, allowing the ... Maintainability of application - initiation of CIRP - Corporate Debtor committed default in paying financial debt - existence of debt and dispute or not - defence raised is that the High Court admitted the Petition of winding up of the Corporate Detor filed by one of its other creditors - Section 7 of Insolvency and Bankruptcy Code - HELD THAT:- The proceeding under Section 7, 9 or 10 of Insolvency and Bankruptcy Code is maintainable and can be proceeded with irrespective of the fact that winding up petition of the Corporate Debtor is admitted by that High Court. The proceeding under Insolvency and Bankruptcy Code will not be maintainable only if order of winding up of the Company is passed by Hon'ble High Court. In this case, Hon'ble High Court admitted the Petition for winding up of the Corporate Debtor. No doubt Provisional Liquidator is also appointed but final order of winding up has not been passed and Official Liquidator has not been appointed - It is settled law as declared by the Apex Court that the proceeding under I & B Code will not be maintainable only if final order of winding up is passed by the High Court - this application filed by Financial Creditor under Section 7 of Insolvency and Bankruptcy Code is maintainable. Application admitted - moratorium declared. Issues:1. Maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code.2. Appointment of Interim Resolution Professional.3. Declaration of moratorium and public announcement under Sections 13 and 15 of the IBC.Issue 1: Maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code:The Financial Creditor filed an application under Section 7 of the Insolvency and Bankruptcy Code against the Corporate Debtor for defaulting on a financial debt. The Corporate Debtor argued that a winding-up petition was admitted by the High Court, and a Provisional Liquidator was appointed, thus rendering the application under Section 7 not maintainable. However, the Adjudicating Authority held that the mere admission of a winding-up petition does not bar proceedings under the IBC unless a final winding-up order is passed. Citing various rulings and orders, including those by NCLAT and the Apex Court, it was established that the IBC proceedings can continue until a final winding-up order is issued. Therefore, the application under Section 7 was deemed maintainable, and the Financial Creditor's claims were upheld.Issue 2: Appointment of Interim Resolution Professional:The Financial Creditor proposed the appointment of Mr. Ajay Kumar Agarwal as the Interim Resolution Professional (IRP). The Adjudicating Authority found no pending disciplinary inquiry against the proposed IRP and declared the application defect-free. Consequently, the appointment of Mr. Ajay Kumar Agarwal as the IRP was approved to ascertain creditors' particulars and convene a Committee of Creditors for formulating a resolution plan.Issue 3: Declaration of moratorium and public announcement under Sections 13 and 15 of the IBC:Following the admission of the application under Section 7, the Adjudicating Authority declared a moratorium and public announcement in accordance with Sections 13 and 15 of the IBC. The moratorium prohibited various actions against the Corporate Debtor, ensuring the continuity of essential services. Additionally, specific instructions were given regarding the effect and duration of the moratorium, emphasizing that it would cease upon the approval of a resolution plan or a liquidation order. The Resolution Professional was directed to conduct the Corporate Insolvency Resolution Process (CIRP) efficiently, adhering to the regulations outlined in the IBC. The Registry was tasked with communicating the order to all relevant parties, with a progress report scheduled for a future date.In conclusion, the judgment addressed the maintainability of the application under Section 7, appointed an Interim Resolution Professional, and laid out directives for the moratorium and public announcement, ensuring the orderly progression of the Corporate Insolvency Resolution Process.