2018 (3) TMI 1319 - Tri - Insolvency and Bankruptcy

Tribunal rules in favor of financial creditor in insolvency case, upholding validity and compliance.

Phoenix Arc Private Limited Versus Sarbat Cotfab Private Limited

The tribunal found in favor of the petitioner, a financial creditor, in a case involving competency of the petitioner, validity of financial creditor ... Initiate insolvency resolution process against the respondent-corporate debtor - existence of debt on the basis of assignment deed - application by competent person - Held that:- the document of assignment cannot be rejected by this Tribunal while disposing of the instant petition on the ground of being insufficiently stamped though the petitioner would be bound by the consequences if any adverse order on changing of stamp duty comes into play. As the financial creditor has been able to show the existence of default committed by the respondent-corporate debtor on the basis of evidence furnished by the financial creditor. There was no dispute of the respondent-corporate debtor to have borrowed the debt from the Bank and that the respondentcorporate debtor is in default as defined in Section 3(12) of the Code. The 'default' means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the case may be. The other requirement of sub-Section (3) of Section 7 of the code is that the financial creditor is to propose the name of the Resolution Professional to act as Interim Resolution Professional. In this case, the financial creditor has proposed the name of Mr.Manoj Sehgal, registered Resolution Professional with the IBBI to act as Interim Resolution Professional and filed written communication in Form No.2 Annexure-116 which is found in order. He has furnished his registration number also. The application being complete and it is made out that the corporate debtor has committed default, the petition deserves to be admitted. Issues Involved:1. Competency of the person filing the petition.2. Validity of the petitioner as a 'Financial Creditor' based on the Assignment Deed.3. Compliance with requirements under Section 7 of the Insolvency and Bankruptcy Code, 2016.Detailed Analysis:1. Competency of the person filing the petition:The petition was filed by Mr. Ajit Kewin, whose authority was challenged on the grounds that his name was not explicitly mentioned in the resolution dated 20.09.2017. However, the tribunal found that Mr. Ajit Kewin, identified as 'Head Resolution', was authorized by the company to file the petition. The tribunal dismissed the objection as too technical and held the issue in favor of the petitioner-financial creditor.2. Validity of the petitioner as a 'Financial Creditor' based on the Assignment Deed:The petitioner, Phoenix ARC Private Limited, claimed to be a financial creditor through an assignment deed dated 26.06.2014 from Canara Bank. The respondent raised objections, arguing the deed was insufficiently stamped and not registered in the district where the mortgaged properties were situated. The tribunal noted that the order of the Additional Collector, which impounded the deed, was stayed by the Hon’ble Supreme Court, thus the deed could not be considered insufficiently stamped. The tribunal also held that the assignment deed, being an assignment of debt and not a transfer of immovable property, did not require registration in the district where the properties were located. The tribunal referred to the judgment in ICICI Bank Limited Vs. Official Liquidator of APS Star Industries Limited, emphasizing that the assignment of debt does not affect the rights of the borrower in the mortgaged properties. Consequently, the tribunal held that the petitioner was a valid financial creditor entitled to apply under Section 7 of the Code.3. Compliance with requirements under Section 7 of the Insolvency and Bankruptcy Code, 2016:The tribunal examined whether the petition complied with Section 7 of the Code, which requires evidence of default, the name of the proposed interim resolution professional, and other specified information. The petitioner provided extensive documentation, including loan agreements, statements of account certified under the Bankers Books Evidence Act, and acknowledgments of debt signed by the respondent. The tribunal found that the petitioner had demonstrated the existence of default. The tribunal also addressed the respondent's contention regarding the calculation of the outstanding amount, noting that the exact amount would be determined by the Interim Resolution Professional (IRP) or Resolution Professional (RP) during the insolvency resolution process. The tribunal appointed Mr. Manoj Sehgal as the IRP and declared a moratorium as per Section 14(1) of the Code, prohibiting suits, transferring assets, and recovery actions against the corporate debtor.Conclusion:The petition was admitted, and the tribunal issued directions for the appointment of the IRP and the initiation of the corporate insolvency resolution process. The tribunal dismissed CA No.19 of 2018 and directed communication of the order to the parties and the IRP.