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of <h1>Insolvency Application Approved Despite Objections, Emphasis on Completeness and Moratorium</h1> <h3>Somnath Textile Pvt. Ltd. Versus State Bank of India</h3> The Adjudicating Authority approved the insolvency application under Section 10 of the Insolvency and Bankruptcy Code, 2016, despite objections from State ... Proceedings under Insolvency and Bankruptcy Code, 2016 - admission of application and appointment of the Interim Resolution Professional - Held that:- A perusal of the application and the annexures goes to show that the application is complete. The applicant has recommended name of Interim Resolution Professional. The applicant has also filed written communication given by the proposed Interim Resolution Professional. The applicant is admitting the existence of financial debt and occurrence of default in payment of financial debt. The books of account of the applicant company also substantiate the same. In view of the above discussion, the application filed by the Corporate Applicant (Corporate Debtor) is admitted under Section 10(4)(a) of the Code. Section 13 of the Code enjoins upon the Adjudicating Authority to exercise its discretion to pass an order to declare a moratorium for the purposes referred to in Section 14, to cause a public announcement of the initiation of Corporate Insolvency Resolution and call for submission of claims as provided under Section 15 of the Code. Sub-section (2) of Section 13 says that public announcement shall be made immediately after the appointment of Interim Insolvency Resolution Professional. Hence, Shri Premraj Ramratan Laddha, having IP Registration No. IBBI/IPA-001/IP-P00060/2016-17/10138 and residing at 304, Abhijit-3, Above Pantaloon, Mithakhali, Law Garden Road, Ellisbridge, Ahmedabad - 380 006, is appointed as “Interim Insolvency Resolution Professional”, who filed Form- 2 and Certification of Registration issued by the Insolvency and Bankruptcy Board of India. This Adjudicating Authority also directs the Corporate Applicant to make a public announcement in terms of Clause (b) of sub-section (1) of Section 13 of the Code. Issues involved:Application under Section 10 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process.Detailed Analysis:1. Corporate Debtor's Financial Situation:The petitioner, a company registered under the Companies Act, faced a severe liquidity crisis leading to non-repayment of debts to State Bank of India. The bank classified the debt as a non-performing asset and initiated possession of secured assets under the SARFAESI Act, prompting the petitioner to file for Corporate Insolvency Resolution Process.2. Legal Proceedings and Challenges:State Bank of India had initiated legal actions under the SARFAESI Act and at the Debt Recovery Tribunal, which were disclosed in the application. The petitioner also had a pending Reference before the BIFR, which stood abated due to the bank's actions. The bank objected to the insolvency application, claiming it was a delay tactic.3. Adjudicating Authority's Decision:The Adjudicating Authority found the application valid under Section 10 of the Code, disregarding the bank's objections regarding pending proceedings. The Authority emphasized the overriding effect of the Code's provisions and the need to assess the petitioner's intention behind the insolvency process.4. Approval of Insolvency Application:The Authority admitted the application, noting the completeness of the submission, acknowledgment of debt default, and appointment of an Interim Resolution Professional. The applicant's financial records supported the claim of default, leading to the application's acceptance under Section 10(4)(a) of the Code.5. Moratorium and Resolution Process:The Authority declared a moratorium under Section 13 of the Code, appointing an Interim Insolvency Resolution Professional. The moratorium prohibited legal actions against the Corporate Debtor and asset disposals, ensuring the continuation of essential services during the resolution process.6. Conclusion:The order of moratorium would remain in force until the completion of the Corporate Insolvency Resolution Process, safeguarding the interests of all stakeholders involved. The Authority directed the Corporate Applicant to comply with the necessary public announcements and procedural requirements for the resolution process to proceed effectively.
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