2018 (5) TMI 171 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process under IBC

The tribunal admitted the petition, initiating the Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency and Bankruptcy Code, ... Corporate Insolvency Resolution Process - proof of occurrence of default - Held that:- Considering the voluminous evidences annexed along with the Application and in the light of the provisions of Section 10 of The Code hereby hold that the conditions as prescribed under section 10 of The Code have duly been fulfilled. Since this is a Petition of “Corporate Debtor”, therefore, the Insolvency Process shall commence as prescribed under Section 10 of IBC 2016. On one hand the existence of Financial Debt as well as Operational Debt is proved, on the other hand the occurrence of “default” is also established. The Corporate Debtor had failed to pay the amounts due and also failed to adhere to or comply with the other terms of Facility agreements. The Financial Debts have been classified as “Non-Performing Asset” in the books of the Financial Creditor. The Petition under consideration therefore deserves “Admission”. The Corporate Debtor has intimated the name of the IRP Mr. Vijaykumar V. Iyer, Address: Deloitte Touche Tohmatsu India LLP, Indiabulls Finance Centre, Tower 2, 27th Floor, Senapati Bapat Marg, Elphinstone Road (West), Mumbai - 400 013, email: [email protected], Registration No. IBBI/IPA-001/IP-P00261/2017-18/10490 in Part-II of Form No.6 and the said IRP has given his consent in Form No.2, placed on record. The Petition is hereby “Admitted”. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency and Bankruptcy Code (IBC), 2016.2. Objection by an Operational Creditor regarding the admissibility of the application.3. Freezing of the Trust and Retention Account (TRA) and its impact on the Corporate Debtor.4. Urgency due to potential suspension of the telecom license by the Department of Telecommunications (DoPT).5. Examination of the financial position and potential for revival of the Corporate Debtor.Issue-wise Detailed Analysis:1. Initiation of CIRP under Section 10 of IBC, 2016:The Corporate Applicant filed an application to initiate CIRP by invoking Section 10 of the IBC, 2016, along with Rule 7 of the IBC (Application to Adjudicating Authority) Rules, 2016. The application was submitted on 28-02-2018 with requisite Form No.6. The applicant, Aircel Cellular Limited, provided details of its shareholding pattern and financial obligations. The necessity of the application was explained by referring to the RBI guidelines dated 12th February 2018, which emphasized early identification and reporting of stressed assets. The guidelines also withdrew several existing instructions on the resolution of stressed assets, making the IBC framework the primary recourse for stressed entities.2. Objection by an Operational Creditor:An intervener, representing an operational creditor, GTL Infrastructure Limited, objected to the admissibility of the application. The intervener cited a Delhi High Court order dated 29-01-2018, which restrained Aircel from disposing of its assets or creating third-party interests. The intervener argued that the application under Section 10 should not be admitted as it could jeopardize their recovery rights. They also claimed that the petitioner did not disclose the pendency of the High Court case, making the petition malicious and defective.3. Freezing of the TRA and its Impact:The Corporate Debtor's TRA account was frozen by the banks, preventing the company from using the funds for day-to-day operations, including payment of salaries. This situation led to a law and order problem as employees and vendors agitated for their dues. The Senior Advocate argued that admitting the petition and appointing an Insolvency Resolution Professional (IRP) would allow the company to continue operations and avoid shutting down the business.4. Urgency Due to Potential Suspension of Telecom License:There was an apprehension that the telecom license could be suspended by the DoPT due to the company's stressed financial position. The Senior Advocate emphasized the urgency of admitting the petition to save the company and ensure continuity of operations.5. Examination of Financial Position and Potential for Revival:The tribunal examined the financial position of the Corporate Debtor and noted that there was a scope for revival. The company had valuable assets and potential for revenue generation, which could be maximized under the supervision of an IRP. The tribunal considered the voluminous evidence provided and concluded that the conditions prescribed under Section 10 of the IBC were fulfilled. The existence of financial and operational debt, as well as the occurrence of default, was established.Findings and Order:The tribunal admitted the petition, initiating the CIRP as prescribed under Section 10 of the IBC, 2016. The tribunal appointed Mr. Vijaykumar V. Iyer as the IRP and directed him to carry out the functions as mentioned under the IBC. The tribunal also imposed a moratorium as per Section 14 of the IBC, prohibiting various actions against the corporate debtor, including the institution of suits, transfer of assets, and recovery of property. The operational creditors were given liberty to lodge their claims before the IRP.The tribunal's decision emphasized the importance of restructuring stressed assets and reviving the company's finances to protect the interests of all stakeholders. The order also included directions for the promoters and directors not to leave the country without permission.Conclusion:The petition was admitted, and the CIRP commenced from the date of the order. The tribunal's detailed analysis and findings addressed the objections raised by the operational creditor and highlighted the necessity and urgency of initiating the insolvency process to ensure the company's revival and continuity of operations.