2019 (3) TMI 1780 - Tri - IBC

Tribunal Initiates CIRP Against Corporate Debtor, Appoints Interim Resolution Professional, Declares Moratorium.

ICICI Bank Limited Versus Punj Llyod Limited

The tribunal admitted the petition under Section 7 of the IBC, initiating the CIRP against the Corporate Debtor. An Interim Resolution Professional was ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - bar on the remedy provided for resolution of insolvency - existence of debt and default - HELD THAT:- The RBI Circular dated 12.02.2018 does not create any bar on the remedy provided for resolution of insolvency in accordance with the provisions of the Code. The arguments raised by Dr. Chaudhary, learned senior counsel for the Corporate Debtor would not require any detailed examination. In Jaipur Metals & Electricals Employees Organisation [2018 (12) TMI 674 - SUPREME COURT], the view of Hon 'ble the Supreme Court is crystal clear. In paras 19 and 20 of the judgment it has been categorical held that the proceedings under the IBC is an independent proceeding which has nothing to do with the transfer of pending winding up proceedings before the High Court. It further clarifies that a Financial Creditor is at liberty to apply under Section 7 of the Code to the Tribunal at any time before a winding up order is passed. It is patent that all requirements of Section 7 of the Code for initiation of Corporate Insolvency Resolution Process by a Financial Creditor stand fulfilled. In that regard, the application is complete as per the requirements of Section 7 (2) of the Code and other conditions prescribed by Rule 4 (1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. There is overwhelming evidence to prove default and name of the resolution professional has also been clearly specified - petition admitted - moratorium declared. Issues Involved:1. Initiation of the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Compliance with the RBI Circular dated 12.02.2018.3. Parallel proceedings of winding up petition and insolvency petition.4. Appointment of Interim Resolution Professional and declaration of moratorium.Detailed Analysis:1. Initiation of the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016:The Financial Creditor, ICICI Bank Limited, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Insolvency Resolution Process against the Corporate Debtor, Punj Lloyd Limited. The Financial Creditor provided detailed particulars of financial debt, including various loan facilities extended to the Corporate Debtor, such as redeemable, secured, and non-convertible Debentures, Working Capital Facility, Term Loan Facility, and Corporate Guarantee. The Corporate Debtor executed several documents towards availing these loan facilities, which were further secured by the personal guarantee of Mr. Atul Punj. The Financial Creditor issued multiple notices to the Corporate Debtor due to repeated defaults in repayment, but the Corporate Debtor failed to clear the unpaid debt.2. Compliance with the RBI Circular dated 12.02.2018:The Corporate Debtor argued that the RBI Circular dated 12.02.2018 precluded the filing of the insolvency petition if a resolution plan was pending. However, the tribunal found that the RBI Circular did not create any bar on the remedy provided for resolution of insolvency under the Code. The Circular allowed lenders to file insolvency petitions under the IBC even before the expiry of the timelines or without attempting a resolution plan outside the IBC. The tribunal noted that no resolution plan had materialized as of the last meeting dated 16.01.2019, and therefore, the Financial Creditor was not under any legal obligation to wait for a resolution plan.3. Parallel proceedings of winding up petition and insolvency petition:The Corporate Debtor contended that the Financial Creditor could not initiate parallel proceedings by continuing the winding up petition and pressing the petition under Section 7 of the Code. The tribunal, referencing the Supreme Court judgment in Forech India Ltd. v. Edelweiss Assets Reconstruction Company Ltd., held that proceedings under the IBC are independent and can be initiated at any time before a winding up order is passed. The tribunal also referred to the Supreme Court's decision in Jaipur Metals & Electricals Employees Organisation, which clarified that the IBC proceedings have an overriding effect due to the non-obstante clause in Section 238 of the Code.4. Appointment of Interim Resolution Professional and declaration of moratorium:The tribunal found that all requirements of Section 7 of the Code for initiating the CIRP by a Financial Creditor were fulfilled. The application was complete, and there was overwhelming evidence of default. The tribunal appointed Mr. Gaurav Gupta as the Interim Resolution Professional (IRP) and directed him to make a public announcement regarding the admission of the application within three days. A moratorium was declared in terms of Section 14 of the Code, prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of assets, and actions to enforce security interests. The tribunal also directed the Financial Creditor to deposit a sum of Rs. 2 lacs with the IRP to meet the expenses for performing his functions.Conclusion:The tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process against the Corporate Debtor, Punj Lloyd Limited. The tribunal appointed an Interim Resolution Professional and declared a moratorium, ensuring compliance with the provisions of the Code and rejecting the objections raised by the Corporate Debtor regarding the RBI Circular and parallel proceedings.