2020 (1) TMI 1615 - Tri - Insolvency and Bankruptcy

Admission of Insolvency Petition for CLC Industries Limited Sparks Corporate Resolution Process

The Tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, finding compliance with legal provisions. An Interim Resolution ... Default - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - interim resolution professional appointment - moratorium under Section 14 - public announcement under Section 13(2) - compliance with Rule 4(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - proof of security and charge registration - bankers' book evidence - restructuring and revocation - novation and defaults under debt restructuringDefault - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - compliance with Rule 4(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - restructuring and revocation - novation and defaults under debt restructuring - Whether a default had occurred and the Section 7 petition was complete and maintainable. - HELD THAT: - The Tribunal found that the corporate debtor had entered into a restructuring by letter dated 13.02.2017 which fixed four instalments; the instalment due on 15.06.2017 was not paid within the 30-day default period stipulated in the restructuring, and the petitioner revoked the restructuring. Coupled with documentary evidence including charge registration and loan agreements, the Tribunal held that the indebtedness stood established for the purpose of Section 7. After noting compliance with the procedural requirements of Rule 4(2) and the provisions of Section 7 (including prior consideration in analogous orders), the Tribunal concluded that a default had occurred and the application under Section 7(2) was complete. [Paras 13, 14, 15, 16]Default established; petition under Section 7 is complete and maintainable.Interim resolution professional appointment - public announcement under Section 13(2) - Appointment of the Interim Resolution Professional and requirement for public announcement. - HELD THAT: - On satisfaction that the proposed IRP had no pending disciplinary proceedings and that the Section 7 application was admissible, the Tribunal appointed Mr. Subhash Kumar Kundra as Interim Resolution Professional. In pursuance of Section 13(2) of the Code the IRP was directed to make the statutory public announcement immediately following admission. [Paras 16, 17, 18]IRP appointed and directed to make immediate public announcement.Moratorium under Section 14 - Declaration and scope of moratorium upon admission of the petition. - HELD THAT: - The Tribunal declared the moratorium in terms of Section 14, while clarifying that the moratorium would not apply to transactions that may be notified by the Central Government and would not permit termination or interruption of supplies of essential goods or services (including water, electricity) as contemplated by Regulation 32 of the IBBI Regulations. [Paras 19]Moratorium declared with specified exceptions for notified transactions and essential supplies.Proof of security and charge registration - bankers' book evidence - Sufficiency of evidence regarding security, charge registration and bank records to support the claim. - HELD THAT: - The petitioner produced certificates of registration of charge from the Registrar of Companies and filed certificates under the Bankers' Book Evidence Act with account statements. The Tribunal held that these documents fulfilled the requirements under the Companies Act concerning charge registration and that the bankers' book certificate supported the authenticity of the account statements filed by the financial creditor for the limited purpose of establishing the claim at the admission stage. [Paras 6, 8, 14]Security registration and bankers' book evidence found sufficient for admission purposes.Deposit for IRP expenses - directions to ex-management to produce records - Interim administrative directions regarding deposit to meet IRP expenses and production of documents by ex-management/auditors. - HELD THAT: - The Tribunal directed the financial creditor to deposit a sum to meet initial IRP expenses within three days, subject to later adjustment by the Committee of Creditors, and ordered ex-management, auditors and others to furnish books, records and information to the IRP within one week, warning of coercive steps for non-compliance. The amounts are to be accounted by the IRP and refunded to the financial creditor as appropriate. [Paras 20, 21]Financial creditor to deposit specified sum for IRP expenses; ex-management/auditors directed to provide records within one week.Determination of amount due - Whether the Tribunal may finally determine the precise amount due on admission. - HELD THAT: - The Tribunal noted complaints about discrepancies in the statement of account but held that the precise quantification of the amount due could not be determined in summary admission proceedings. It directed that the IRP may seek corrections from ex-promoters/directors and place issues before the financial creditor, and indicated that final verification/quantification is to be undertaken by the appropriate fora (Information Utility / Committee of Creditors) rather than in the admission order. [Paras 22]Precise amount due not determined at admission; verification/quantification left to IRP, Information Utility and/or Committee of Creditors.Final Conclusion: The Tribunal admitted the Section 7 petition, held that default had occurred and the application was complete, appointed the named Interim Resolution Professional, directed immediate public announcement, declared the moratorium subject to statutory exceptions, ordered the financial creditor to deposit funds for IRP expenses and directed production of records by ex-management; quantification of the debt was left for verification by the IRP/Information Utility and Committee of Creditors. Issues:1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process.2. Default in payment by the Corporate Debtor to the Financial Creditor.3. Discrepancies in the statement of account presented by the Financial Creditor.4. Compliance with the provisions of the Insolvency and Bankruptcy Code, 2016.Analysis:Issue 1: Application under Section 7 of the Insolvency and Bankruptcy Code, 2016The Financial Creditor, Edelweiss Asset Reconstruction Company Limited, filed a petition under Section 7 of the Code seeking initiation of Corporate Insolvency Resolution Process against CLC Industries Limited, the Corporate Debtor. The Financial Creditor proposed the name of Mr. Subhash Kumar Kundra as the Interim Resolution Professional, fulfilling the requirements of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.Issue 2: Default in payment by the Corporate Debtor to the Financial CreditorThe Financial Creditor detailed the financial debt granted to the Corporate Debtor by ICICI Bank Limited, highlighting the default amount as of 15.03.2019 to be Rs. 1,04,39,98,947.78. The Financial Creditor asserted that the Corporate Debtor repeatedly defaulted on repayment schedules, leading to the issuance of various notices to clear the unpaid debt/liability.Issue 3: Discrepancies in the statement of account presented by the Financial CreditorThe Respondent raised objections regarding an alleged settlement document, claiming novation of the contract and disputing the liability. However, the Petitioner provided evidence of restructuring approval and subsequent non-compliance by the Corporate Debtor, leading to the revocation of the restructuring agreement.Issue 4: Compliance with the provisions of the Insolvency and Bankruptcy Code, 2016The Tribunal found that the provisions of Section 7(2) and Section 7(5) of the IBC were duly complied with, referencing a previous judgment for clarification. After thorough examination, the Tribunal admitted the petition, appointed an Interim Resolution Professional, declared a moratorium, and directed the Financial Creditor to deposit funds for the resolution process. Additionally, directions were issued for document submission and information provision by the Ex-Management/Auditors.In conclusion, the Tribunal admitted the petition under Section 7 of the Code, ensuring compliance with legal provisions and initiating the Corporate Insolvency Resolution Process for the Corporate Debtor, CLC Industries Limited.