Tribunal asserts jurisdiction, appoints IRP, acknowledges debt in insolvency case with forum shopping

The Tribunal confirmed territorial jurisdiction, appointed an Interim Resolution Professional, and acknowledged debt and default in a case involving forum shopping and a One-Time Settlement. Despite arguments for OTS and parallel proceedings, the Tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, declared a moratorium, and directed the IRP to initiate insolvency resolution proceedings.

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Issues Involved:
1. Territorial Jurisdiction
2. Appointment of Interim Resolution Professional (IRP)
3. Debt and Default
4. Parallel Proceedings and Forum Shopping
5. One-Time Settlement (OTS) and Payments
6. Admissibility of Application under Section 7 of the Insolvency and Bankruptcy Code, 2016
7. Moratorium and Consequences

Detailed Analysis:

1. Territorial Jurisdiction:
The Tribunal confirmed its territorial jurisdiction over the matter as the registered office of the respondent company, Dynamic Shells (India) Private Limited, is located in New Delhi, which falls under the jurisdiction of the National Company Law Tribunal (NCLT), Principal Bench, Delhi.

2. Appointment of Interim Resolution Professional (IRP):
The applicant, Punjab National Bank, proposed Mr. Nilesh Sharma as the Interim Resolution Professional (IRP). Mr. Sharma agreed to the appointment and provided necessary declarations and disclosures, satisfying the requirements under Section 7 (3) (b) of the Insolvency and Bankruptcy Code, 2016.

3. Debt and Default:
The applicant bank granted various fund-based and non-fund-based loan facilities to the respondent company. Despite availing of these facilities, the respondent failed to adhere to the repayment schedules, leading to the classification of the account as a non-performing asset (NPA) on 31.12.2011. The total outstanding amount claimed by the applicant bank as of 31.12.2011 was Rs. 30,00,98,972.50. The Tribunal noted that the applicant bank provided sufficient evidence, including loan documents, balance sheets, and certified statements of accounts, to prove the existence of debt and default.

4. Parallel Proceedings and Forum Shopping:
The respondent argued that the applicant bank engaged in forum shopping by initiating multiple litigations in different forums, including the Debt Recovery Tribunal (DRT) and under the SARFAESI Act, 2002. However, the Tribunal held that the pendency of such proceedings does not bar the initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Code, as per Section 238 of the Code, which provides an overriding effect to the provisions of the Code over other laws.

5. One-Time Settlement (OTS) and Payments:
The respondent contended that there was a One-Time Settlement (OTS) agreed upon between the parties, and partial payments were made. However, the Tribunal emphasized that in the absence of a binding compromise agreement or debt restructuring approval, the adjudicating authority cannot indefinitely extend time or defer the admission of the application under Section 7 of the Code.

6. Admissibility of Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal observed that the application under Section 7 is maintainable if the default is more than one lakh rupees. The applicant bank, being a financial creditor, is entitled to file the application. The Tribunal is required to ascertain the occurrence of default, ensure the application is complete, and verify that no disciplinary proceedings are pending against the proposed IRP. The Tribunal found that the application was complete, and the applicant bank provided overwhelming evidence of debt and default.

7. Moratorium and Consequences:
Upon admitting the application, 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.
- Transfer, encumbrance, or disposal of the corporate debtor's assets.
- Foreclosure or enforcement of security interests.
- Recovery of property by owners or lessors.

The Tribunal directed the IRP to make a public announcement and perform his functions as per the Code. The personnel associated with the corporate debtor are legally obligated to assist the IRP. The IRP must protect and preserve the value of the corporate debtor's property.

Conclusion:
The Tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, and appointed Mr. Nilesh Sharma as the Interim Resolution Professional. The moratorium was declared, and the IRP was directed to proceed with the insolvency resolution process.

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