2019 (7) TMI 1724 - Tri - Insolvency and Bankruptcy

Tribunal Initiates CIRP Against Corporate Debtor, Appoints IRP: Moratorium in Effect

The Tribunal admitted the Financial Creditor's application, initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. Mr. ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of Financial debt and dispute or not - Non-performing asset - HELD THAT:- This Tribunal issued notice to the Corporate Debtor on 22nd February, 2018 which was duly received by the Corporate Debtor who sought time to file reply on 4th April, 2018, and after filing the rejoinder by the Financial Creditor, time was sought by the Corporate Debtor for settlement. However, request for seeking further time made on behalf of the Corporate Debtor was objected to by the Financial Creditor after his pleadings were completed. The matter has been heard finally on 3rd July, 2019. The Counsel for the Financial Creditor has taken us through the contents and averments made in the application and also through various documents placed on record. While hearing the Counsel for the Corporate Debtor, the Corporate Debtor has mainly submitted that the petition is defective and cannot be accepted because the documents and bank statements enclosed with the application are in violation of the Bankers Books Evidence Act, 1891. In the instant case, there is no plea of limitation. This application was filed in time before the expiry of the period of limitation. So even if there are certain errors in calculation of the debt due, or that the statement of account was not updated immediately before the filing of this application, according to us, the plea of limitation is devoid of any merit. We are on summery trial. The law is settled that 'a limited inquiry cannot be converted into a full dressed trial' The application filed by the Financial Creditor under Section 7 of the Insolvency & Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, M/s. Amrit Fresh Private Limited is hereby admitted - moratorium declared. Issues Involved:1. Admissibility of documents and bank statements under the Bankers Books Evidence Act, 1891.2. Existence and default of financial debt.3. Appointment of Interim Resolution Professional (IRP).4. Declaration of moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016.Issue-wise Detailed Analysis:1. Admissibility of Documents and Bank Statements:The Corporate Debtor contended that the application was defective due to non-compliance with the Bankers Books Evidence Act, 1891, specifically the omission of certification of the bank statements. The Tribunal examined the arguments and referred to the case of Ishwar Dass Jain vs. Sohan Lal, where it was held that entries in account books are admissible if kept in the regular course of business but cannot alone create liability. The Tribunal concluded that the Financial Creditor's reliance on the balance sheet filed with the MCA and the absence of dispute over the statement of accounts by the Corporate Debtor negated the need for such certification.2. Existence and Default of Financial Debt:The Financial Creditor provided evidence of the Corporate Debtor's financial debt through various documents, including the sanction letter, demand promissory notes, letters of undertaking, and hypothecation agreements. The Corporate Debtor acknowledged the debt in its balance sheet, showing an outstanding amount borrowed from the Financial Creditor. The Tribunal found that the existence of financial debt under Section 5(8) of the Insolvency & Bankruptcy Code, 2016, was not disputed, and the default in repayment was evident. The Tribunal dismissed the Corporate Debtor's objections regarding the mismatch in figures and non-production of the Information Utility Certificate, citing other sufficient evidence like the CIBIL report.3. Appointment of Interim Resolution Professional (IRP):The Financial Creditor proposed Mr. Niraj Agrawal as the IRP, who provided written consent and declared no conflict of interest with the Corporate Debtor. The Tribunal accepted the proposal and appointed Mr. Agrawal as the IRP, directing him to ascertain the particulars of creditors and convene a meeting of the Committee of Creditors within 105 days from the insolvency commencement date.4. Declaration of Moratorium:The Tribunal declared a moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016, prohibiting:a) Institution or continuation of suits or proceedings against the Corporate Debtor.b) Transfer, encumbrance, or disposal of the Corporate Debtor's assets.c) Actions to foreclose or enforce any security interest.d) Recovery of property by owners or lessors.The moratorium was to remain effective from the date of admission until the completion of the Corporate Insolvency Resolution Process (CIRP) or until an order of liquidation or approval of a resolution plan was passed.Final Order:The Tribunal admitted the application filed by the Financial Creditor, initiating the CIRP against the Corporate Debtor. The Tribunal directed the IRP to make a public announcement, call for claims, and convene a meeting of the Committee of Creditors. The Registry was instructed to communicate the order to the relevant parties and list the matter for filing of the progress report on 13th August 2019.