2018 (7) TMI 40 - Tri - Insolvency and Bankruptcy

Tribunal upholds petition under Insolvency Code, dismisses challenge to NPA classification.

Oriental Bank of Commerce Versus Sonear Industries Ltd.

The Tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by Oriental Bank of Commerce against M/s Sonear ... Corporate Insolvency Resolution Process - amount of default and unpaid debt - power of attorney eligibility to file application - Held that:- Form and manner of the application has to be the one as prescribed. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of IBC. We are satisfied that a default has occurred and the application under sub section 2 of Section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. Thus, the application warrant admission. As a sequel to the above discussion, this petition is admitted - Interim Resolution Professional appointed The argument pressed to oppose the admission of the petition advanced on behalf of the Corporate Debtor cannot be accepted because the amount of default and unpaid debt as per the CIBIL account has been proved. Such a piece of documentary evidence result into a binding presumption. No substance in the submission of Corporate Debtor that Mr. R.C. Sharma, Assistant General Manager could not have presented this petition as he has been authorized in pursuance of Power of Attorney executed in 2003 whereas the Code has been enforced in 2016. The general Power of Attorney is a widely worded document and it has various clauses empowering the attorney to file any proceedings before Courts or Tribunal. Therefore, there is no substance in this argument as well and the same is rejected. Issues Involved:1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Validity of classification and declaration of credit facilities as Non-Performing Asset (NPA).3. Authority of the Assistant General Manager to file the petition.4. Appointment of Interim Resolution Professional.5. Declaration of moratorium under Section 14 of the Code.6. Obligations and duties of Interim Resolution Professional.Detailed Analysis:1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:The Financial Creditor, Oriental Bank of Commerce, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s Sonear Industries Limited. The application was filed in the prescribed form and manner, accompanied by the requisite fee, satisfying the requirements of Section 7(2) of the Code.2. Validity of Classification and Declaration of Credit Facilities as Non-Performing Asset (NPA):The Corporate Debtor disputed the classification of its account as NPA and the validity of the credit facilities' declaration. The Financial Creditor declared the account as NPA on 30.11.2016, issuing a recall notice under Section 13(2) of the SARFAESI Act, 2002. The Tribunal found overwhelming evidence, including CIBIL reports and balance confirmation letters, supporting the Financial Creditor's claim. The Corporate Debtor failed to rebut this legally binding presumption with any cogent documentary evidence.3. Authority of the Assistant General Manager to File the Petition:The Corporate Debtor challenged the authority of Mr. R.C. Sharma, Assistant General Manager, to file the petition, arguing that the Power of Attorney dated 04.09.2003 could not authorize actions under a law enacted in 2016. The Tribunal rejected this argument, stating that the Power of Attorney was a widely worded document empowering the attorney to file any proceedings before Courts or Tribunals, thus validating the petition's filing.4. Appointment of Interim Resolution Professional:The Financial Creditor proposed the name of Mr. Kanwal Goyal as the Interim Resolution Professional (IRP). The Tribunal confirmed that Mr. Goyal satisfied the requirements of Section 7(3)(b) of the Code, with no disciplinary proceedings pending against him, and appointed him as the IRP.5. Declaration of Moratorium under Section 14 of the Code:Upon admitting the petition, the Tribunal declared a moratorium as per Section 14 of the Code. This included prohibitions on instituting or continuing suits or proceedings against the Corporate Debtor, transferring or disposing of assets, foreclosing or enforcing security interests, and recovering property occupied by the Corporate Debtor.6. Obligations and Duties of Interim Resolution Professional:The IRP was directed to make a public announcement regarding the admission of the application and to perform all functions as per Sections 15, 17, 18, 19, 20, and 21 of the Code. The Tribunal emphasized the IRP's duty to protect and preserve the value of the Corporate Debtor's property and to act with utmost integrity and honesty. The personnel connected with the Corporate Debtor were legally obligated to cooperate with the IRP.Conclusion:The Tribunal admitted the petition, appointed Mr. Kanwal Goyal as the IRP, and declared a moratorium. The Corporate Debtor's arguments against the petition's admission and the authority of the Assistant General Manager were rejected. The IRP was instructed to follow best practices and principles of fairness throughout the CIRP.