2019 (2) TMI 1972 - Tri - Insolvency and Bankruptcy

Tribunal admits insolvency application against Corporate Debtor

M/s. Edelweiss Asset Reconstruction Company Limited Versus M/s. Sholingur Textiles Limited

M/s. Edelweiss Asset Reconstruction Company Limited Versus M/s. Sholingur Textiles Limited - TMI Issues:Admission of insolvency application under Section 7 of I&B Code against Corporate Debtor, non-compliance with terms of settlement agreement, default in payment by Corporate Debtor, appointment of Interim Resolution Professional, declaration of moratorium.Analysis:The Financial Creditor filed an application under Section 7 of the Insolvency and Bankruptcy Code against the Corporate Debtor seeking admission for Corporate Insolvency Resolution Process. The Financial Creditor claimed a specific amount including principal and interest. The Corporate Debtor, engaged in textiles business, had availed credit facilities from UCO Bank and hypothecated various assets as security. Despite entering into a settlement agreement with the Financial Creditor, the Corporate Debtor failed to make payments as per the agreed terms. The Corporate Debtor cited external hindrances for non-compliance and sought permission to sell assets to repay the debt.The Financial Creditor contended that despite restructuring agreements, the Corporate Debtor failed to comply with payment terms, indicating no progress in debt repayment. The Tribunal found the Financial Creditor's submissions reasonable, noting the Corporate Debtor's default in payment. The Tribunal observed that although explanations were provided for non-compliance, they were insufficient to reject the Financial Creditor's application. Consequently, the Tribunal ordered the initiation of Corporate Insolvency Resolution Process, appointing an Interim Resolution Professional and declaring a moratorium on certain actions against the Corporate Debtor.The Tribunal appointed an Interim Resolution Professional and directed compliance with statutory provisions. The Directors and associated parties were instructed to cooperate with the Interim Resolution Professional. The moratorium was declared to protect the Corporate Debtor's assets during the resolution process. Essential services to the Corporate Debtor were to continue uninterrupted. The Financial Creditor and Registry were directed to notify the Interim Resolution Professional promptly. The Order was pronounced in the presence of the parties' Counsel.This detailed analysis covers the issues of admission of insolvency application, non-compliance with settlement terms, default in payment, appointment of Interim Resolution Professional, and declaration of moratorium as addressed in the Tribunal's judgment.