2018 (12) TMI 70 - Tri - Insolvency and Bankruptcy

Tribunal Admits Application for Corporate Insolvency Resolution Process under Section 7

The Tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, appointed an Interim Resolution Professional, and declared a ... Initiation of corporate insolvency resolution process - default - completeness of application under Section 7 - limitation - admission of application under Section 7 - appointment of Interim Resolution Professional - moratorium - duties of Interim Resolution ProfessionalDefault - completeness of application under Section 7 - admission of application under Section 7 - Application under Section 7 was complete and a default had occurred, warranting admission of the petition. - HELD THAT: - The Tribunal examined the requirements of Section 7(2) and Section 7(5) of the Code and the prescribed form under the Rules. On a conjoint reading it found that the application was filed in the prescribed form and accompanied as required. Having considered the material on record, the Tribunal was satisfied that a default had occurred and that there were no disciplinary proceedings pending against the proposed resolution professional. Consequently the statutory satisfaction required under Section 7(5)(a) was reached and the petition was admitted. [Paras 14]The Section 7 application is admitted on the finding that the application is complete and a default has occurred.Limitation - initiation of corporate insolvency resolution process - The contention that the petition was barred by limitation was rejected and the application was held to be within time. - HELD THAT: - The respondent contended that the petition was filed after more than three years from the alleged disbursement and therefore barred by limitation. The applicant replied that the loan was executed on 27.09.2014 with default occurring on 28.02.2016 and relied upon the recall/balance confirmation dated 31.01.2016. The Tribunal accepted the applicant's position and proceeded to admit the petition, thereby treating the application as filed within the limitation period. [Paras 9, 14]The limitation objection is negatived and the petition is treated as timely filed.Appointment of Interim Resolution Professional - moratorium - duties of Interim Resolution Professional - An Interim Resolution Professional was appointed and moratorium under the Code was declared with directions to the IRP. - HELD THAT: - On admission of the Section 7 application the Tribunal appointed the proposed Interim Resolution Professional whose registration and particulars were recorded. In terms of Sections 13(2) and 14 the Tribunal directed the IRP to make the statutory public announcement and declared the moratorium, specifying the prohibitions flowing from Section 14(1) and the exceptions in subsections (2) and (3). The Tribunal further outlined the IRP's obligations to perform functions under the Code, to protect and preserve the corporate debtor's assets, and to seek assistance from personnel and ex-management as required. [Paras 15, 16, 17, 18]Mr. Tarun Jain is appointed as Interim Resolution Professional; statutory public announcement to be made, moratorium declared, and the IRP directed to perform his duties in accordance with the Code.Final Conclusion: The Tribunal admitted the Section 7 petition on the finding of default and completeness of the application, held the petition to be within limitation, appointed an Interim Resolution Professional and declared the moratorium with attendant directions to the IRP. Issues:1. Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process.2. Dispute over a loan agreement between the financial creditor and the corporate debtor.3. Contention regarding the law of limitation for filing the insolvency application.4. Examination of provisions of Section 7(2) and Section 7(5) of the Insolvency and Bankruptcy Code.5. Appointment of Interim Resolution Professional and declaration of moratorium.Issue 1 - Application under Section 7 of the Insolvency and Bankruptcy Code:The application was filed by M/s. Macro Leafin Private Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate Corporate Insolvency Resolution Process against the corporate debtor, Pradeep Downhole Equipments Private Limited. The applicant claimed to be a financial creditor and provided details of the loan agreement and default in repayment by the corporate debtor.Issue 2 - Dispute over Loan Agreement:The dispute revolved around a loan agreement between M/s. Macro Leafin Private Limited and the corporate debtor, Pradeep Downhole Equipments Private Limited. The applicant alleged that the corporate debtor failed to repay the loan amount along with interest, whereas the respondent denied the default and raised objections regarding the timing of the application and the authenticity of the loan disbursement.Issue 3 - Law of Limitation Contention:The respondent contended that the application was barred by the law of limitation as it was filed over three years after the alleged loan disbursement. However, the applicant argued that the application was within the limitation period as the default occurred later than the execution of the loan agreement.Issue 4 - Examination of IBC Provisions:The Tribunal examined the provisions of Section 7(2) and Section 7(5) of the Insolvency and Bankruptcy Code to determine the admissibility of the application. It was found that the application was filed in the prescribed form and manner, satisfying the conditions for admission under Section 7(5) of the Code.Issue 5 - Appointment of Interim Resolution Professional and Moratorium:Following the admission of the application, Mr. Tarun Jain was appointed as the Interim Resolution Professional. The Tribunal directed the IRP to make a public announcement and declared a moratorium under Section 14 of the Code, imposing restrictions on legal actions against the corporate debtor and asset transfers. The IRP was tasked with managing the affairs of the corporate debtor in accordance with the provisions of the Code.In conclusion, the Tribunal admitted the application under Section 7 of the IBC, appointed an Interim Resolution Professional, and declared a moratorium to facilitate the Corporate Insolvency Resolution Process. The decision was based on a thorough analysis of the loan agreement, law of limitation, and compliance with the provisions of the Insolvency and Bankruptcy Code.