Tribunal admits creditor's petition, appoints IRP for Corporate Insolvency Resolution Process

The tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by financial creditors against the corporate debtor for defaulting on a financial debt. The tribunal appointed an Interim Resolution Professional (IRP) to initiate the Corporate Insolvency Resolution Process (CIRP) and declared a moratorium on legal actions against the corporate debtor. The corporate debtor's objections were rejected, and the tribunal directed the IRP to manage the CIRP in accordance with the Code's provisions, ensuring cooperation from the corporate debtor's management.

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Issues Involved:
1. Financial Creditor's Claim and Default
2. Nature of Investment Scheme
3. SEBI's Involvement and Orders
4. Corporate Debtor's Objections
5. Admissibility of Petition under Section 7 of IBC
6. Appointment of Interim Resolution Professional (IRP)
7. Declaration of Moratorium

Issue-wise Detailed Analysis:

1. Financial Creditor's Claim and Default:
The petitioners, claiming to be financial creditors, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor. The financial debt amounted to Rs. 45,80,000, with an assured return of Rs. 91,60,000, which remained unpaid post the maturity date of 29.03.2017.

2. Nature of Investment Scheme:
The corporate debtor engaged in dairy farming and floated an investment scheme inviting customers to invest in cattle. SEBI classified this scheme as a 'Collective Investment Scheme' (CIS) in its order dated 12.02.2015, upheld by the SAT on 28.06.2017. The scheme involved assured returns, and the financial creditors invested under Category I plans, which required lump sum payments.

3. SEBI's Involvement and Orders:
SEBI received a complaint from RBI regarding illegal fund mobilization by the corporate debtor. After investigation, SEBI issued orders against the corporate debtor for unauthorized CIS operations. The corporate debtor's appeals to SAT were dismissed, and SEBI initiated recovery proceedings, attaching 41 properties of the corporate debtor to recover Rs. 1,136 crores.

4. Corporate Debtor's Objections:
The corporate debtor argued that the petitioners were joint venturers, not financial creditors, and that the claims should be settled by SEBI. The petitioners countered that SEBI and SAT had already determined the corporate debtor's default and that the IBC provisions should prevail. The tribunal rejected the corporate debtor's objections, citing the non-obstante clause in Section 238 of IBC.

5. Admissibility of Petition under Section 7 of IBC:
The tribunal examined Sections 7(2) and 7(5) of IBC, confirming that the application was complete, default had occurred, and no disciplinary proceedings were pending against the proposed IRP. The petitioners provided overwhelming evidence of default and fulfilled all requirements for initiating CIRP.

6. Appointment of Interim Resolution Professional (IRP):
Mr. Rohit Sehgal was appointed as the IRP, with instructions to make a public announcement and declare a moratorium as per Section 13(2) and Section 14 of the Code. The IRP was directed to perform duties under Sections 15, 17, 18, 19, 20, and 21 of the Code, with the ex-management required to cooperate fully.

7. Declaration of Moratorium:
The tribunal declared a moratorium, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovery actions against the corporate debtor. Essential supplies like water and electricity were to continue uninterrupted during the moratorium period.

Conclusion:
The petition was admitted, and the tribunal directed the IRP to proceed with the CIRP while ensuring the corporate debtor's management cooperates and adheres to the Code's provisions. The office was instructed to communicate the order to the relevant parties within seven days.

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