2017 (11) TMI 1992 - Tri - Insolvency and Bankruptcy

Court grants application for Corporate Insolvency Resolution Process under Insolvency and Bankruptcy Code

The court granted the application filed under Section 10 of the Insolvency and Bankruptcy Code, 2016, allowing for the initiation of Corporate Insolvency ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Corporate applicant - existence of debt and dispute or not - HELD THAT:- The Applicant Company itself can be a corporate applicant to lodge application with the adjudicating authority for initiation of Corporate Insolvency Resolution Process in respect of itself on account of default in payment. In the present case the director of the applicant company duly authorised to do so has filed the instant application under Section 10 of the Code on behalf of the applicant company - In compliance of Section 10 (3) (a) of the Code read with Annex-V of Form 6 of the Rules, the applicant company has filed copies of audited financial statements of the Applicant Company for the last two financial years i.e. 2015-16 and 2016-17. In addition, copy of provisional financial statement of the Applicant Company for the current financial year made up to a date not earlier than fourteen days from the date of the application, i.e. from 01.04.2017 to 10.10.2017 has also been filed. It is the case of the applicant that the corporate applicant has availed the loan from Financial Creditor, i.e. Karnataka Bank which was renewed from time to time and finally ₹ 3,50,00,000/- in the form of cash credit and ₹ 2,50,00,000/- as Term loan facility were sanctioned. It is submitted that the applicant company has suffered a huge loss of ₹ 42,36,135/- in financial year 2015-2016, ₹ 60,68,254.98/- in the financial year 2016- 2017 and ₹ 15,006,394.78/- in the current financial year - A copy of notice dated 19.06.2017 issued by financial creditor under Section 13(2) of SARFAESI Act has also been placed on record. It is contended that the applicant company has failed to make payment of the bank dues because of which the Karnataka Bank Limited has declared the account of the applicant company as NPA on 25.01.2017. The procedure in relation to the Initiation of Corporate Insolvency Resolution Process by the Corporate Debtor is delineated under Section 10 of Code, wherein the Corporate Debtor is required to furnish information in accordance with Form-6 of the Rules. Under Form-6, the Corporate Debtor is required to disclose as amongst others, the details of the Corporate Debtor including the date of incorporation as well as the details of financial creditor and operational creditors to whom the Corporate Debtor owes money including their address for correspondence - It is also pertinent to note that in relation to the debts owed by it the Corporate Debtor is required to furnish the total amount of debt and the amount in default and also in particular as to when the financial or operational debt was incurred including the details of the security held, if any, by the creditors and its estimated value. The Corporate Debtor, in addition, is also required to furnish the documents evidencing the existence of financial/operational debt and the amount in default. The petitioner has disclosed the details required by Section 10 of the Code read with Rule-7 of Rules. The particulars of the corporate applicant and those of the financial debt have been disclosed in all material particulars. The name of the Interim Resolution Professional has also been proposed - the present application has been filed in requisite form-6 containing the required particulars in terms of sub-section 2 of Section 10 of the Code. The petitioner satisfies all the statutory requirements. Therefore, the application is admitted. The present application is complete and that the applicant corporate debtor has committed a default. Therefore, as the application is complete the present application is admitted under section 10 (4) (a) of the Code. The corporate insolvency resolution process shall commence from the date of this order under sub-section 5 of section 10 of the Code - Application admitted - moratorium declared. Issues:1. Application filed under Section 10 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.2. Definition of corporate applicant under Section 5(5) of the Code.3. Compliance with Section 10(3)(a) and (b) of the Code.4. Default committed by the applicant company.5. Objection raised by the financial creditor.6. Relevance of judgments by NCLAT.7. Provisions of the Insolvency & Bankruptcy Code, 2016.8. Initiation of Corporate Insolvency Resolution Process by the Corporate Debtor under Section 10 of the Code.9. Admittance of the application and commencement of the corporate insolvency resolution process.10. Issuance of moratorium under Section 14 of the Code.Analysis:1. The judgment pertains to an application filed under Section 10 of the Insolvency and Bankruptcy Code, 2016 for the initiation of Corporate Insolvency Resolution Process concerning the applicant company itself. The application was filed by the director of the company as authorized under the Code.2. The definition of a corporate applicant under Section 5(5) of the Code includes the corporate debtor itself, a member/partner authorized by the constitutional document, an individual managing operations, or a person overseeing financial affairs. In this case, the applicant company qualifies as a corporate applicant.3. The applicant company complied with Section 10(3)(a) and (b) of the Code by submitting audited financial statements for the last two financial years and proposing an Interim Resolution Professional as required. The proposed IRP affirmed eligibility and absence of pending disciplinary proceedings.4. The applicant company had defaulted on payments, leading to a significant financial loss and subsequent declaration as a non-performing asset by the creditor, justifying the application under Section 10 of the Code.5. The financial creditor raised objections regarding the applicant's ability to satisfy the debt and ongoing proceedings under SARFAESI Act. However, unsupported allegations and existing legal actions did not invalidate the application.6. Reference to judgments by NCLAT highlighted that proceedings under SARFAESI Act do not bar insolvency proceedings under the Code, emphasizing the applicant's right to initiate the process.7. The judgment elaborated on the provisions and objectives of the Insolvency & Bankruptcy Code, 2016, emphasizing reorganization and resolution of corporate entities to maximize asset value and balance stakeholder interests.8. Detailed compliance with Form-6 requirements under Section 10 of the Code, including disclosure of financial debts, operational creditors, security details, and submission of necessary documents, justified the admission of the application.9. The court admitted the application, confirming the applicant's default and commencing the corporate insolvency resolution process under Section 10 of the Code.10. A moratorium was issued under Section 14 of the Code, prohibiting certain actions against the corporate debtor and ensuring the supply of essential goods/services during the process, with the appointment of an Interim Resolution Professional to oversee the proceedings.This comprehensive analysis covers the key issues addressed in the judgment, detailing the legal aspects and procedural requirements involved in the application for Corporate Insolvency Resolution Process.