2018 (2) TMI 692 - Tri - Insolvency and Bankruptcy

Union Bank's Petition Under Insolvency Code Granted: Corporate Debtor's Account Declared NPA, Moratorium Imposed

Union Bank of India Versus Ashoka Maltiyarn Mills Ltd.

The petition filed by Union Bank of India as a Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 against a Corporate Debtor ... Corporate Insolvency Resolution Process - proof of inability to pay debt - Held that:- This Bench is satisfied that the Corporate Debtor is in default of liquidating its debt. The financial creditor is therefore entitled to the prayer made. They have proposed the name of Mr. Pinaki Sircar, 31/7, N C Chawdhary Road, Kolkata-700042; Email: [email protected], Contact No.: 9830011159; IP Registration No.: IBBI/IPA-002/IP-N00063/2016-2017/10141 as the Insolvency Resolution Professional. The aforesaid IRP has given his consent as well as certified that he is eligible to be appointed in accordance with the provisions of the Insolvency and Bankruptcy Code of India and that there are no disciplinary proceedings pending against him is in record. We hereby Admit the present petition. A moratorium in terms of Section 14 shall come into effect forthwith Issues:- Petition filed by Union Bank of India as a Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 against a Corporate Debtor for non-payment of debt.- Failure of the Corporate Debtor to adhere to terms and conditions of availed credit facilities.- Declaration of the Corporate Debtor's account as Non-Performing Assets and issuance of notice under Section 13(2) of the SARFAESI Act.- Total outstanding liability of the Corporate Debtor, acknowledgment of debt, and pending recovery suit.- Admission of the petition, appointment of an Insolvency Resolution Professional, and declaration of moratorium under Section 14 of the Code.Analysis:1. The Union Bank of India filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 against a Corporate Debtor for failing to pay its debts. The bank, being a scheduled bank, had provided various credit facilities to the Corporate Debtor, who had executed documents like personal guarantees and Demand Promissory Notes as security for the loans availed. Despite acknowledging the debt, the Corporate Debtor defaulted in making timely payments and regularizing the loan accounts, leading to the account being declared as a Non-Performing Asset. The total outstanding liability, inclusive of interest and charges, was stated, and a suit for recovery was pending before the DRT-1, Kolkata.2. The Corporate Debtor failed to respond to the petition despite being given an opportunity to defend itself. The Tribunal found that the Corporate Debtor had indeed defaulted in paying its debt, and the Financial Creditor's prayer for initiating the Insolvency Resolution Process was justified. An Insolvency Resolution Professional was proposed, and after due diligence, the appointment was approved. The Tribunal admitted the petition and declared a moratorium under Section 14 of the Code, prohibiting certain actions against the Corporate Debtor.3. The moratorium, as per Section 14 of the Code, came into effect immediately, restricting the institution of suits, transfer of assets, enforcement of security interests, and recovery actions against the Corporate Debtor. The appointed Insolvency Resolution Professional was directed to manage the affairs of the Corporate Debtor in accordance with the provisions of the Code. The management and personnel were instructed to cooperate with the IRP, and a report was to be filed within the prescribed time frame. The case was listed for the IRP's report on a specified date for further proceedings.