2019 (3) TMI 1524 - Tri - Insolvency and Bankruptcy

Tribunal accepts Resolution Plan, initiates CIRP under IBC

The Tribunal treated the Section 10 application as a continuation of BIFR proceedings, accepting the MDRS as a Resolution Plan under the IBC. The petition ... Corporate insolvency process - proceedings to be transferred from BIFR authorities to NCLT authorities - Whether the present Section 10 application is to be treated as continuation of BIFR proceedings on repeal of SICA ? - Whether the DRS Scheme is to be treated as a resolution plan for the revival of this corporate applicant? - Whether this petition deserves admission?whether ‘Corporate Person’ U/s 3(7), having outstanding debts, therefore, falls within the definition of ‘Corporate Debtor’ U/s 3(8) & there was a ‘Default’ of non-payment of outstanding debt as per the terms of Sec. 3(12)? HELD THAT:- Due to the repeal of SICA Act the proceedings pending stood abated. On abatement, the proceedings pending are required to be transferred to NCLT within 180 days. So, the Petitioner had no option but to take action by filing a petition U/s 10 of the Insolvency Code. As a consequence, filed this petition on 12.12.2018 with all necessary information such as the position of financial debts and the step taken under SARFAESI provisions. Simultaneously, this petitioner has to inform the Adjudicating Authority the steps taken before BIFR Authority so that a due cognizance of resolution plans, earlier submitted, can be/ must be taken into account. It is correct on the part of the Corporate Debtor/Applicant to move separately an application U/s 30 of IBC which is meant for “submission of resolution plan”. This Applicant has made an attempt by filing this Application to place on record the ‘Resolution Plan’ already considered and taken into account by the BIFR Authorities. There should not be any ambiguity that once the proceedings are to be transferred from BIFR authorities to NCLT authorities, it is but natural that those resolution plans must also be treated as transferred and thereupon ought to be treated as “resolution plan” falling within the ambits of S. 30 of the Code. As far as the petition U/s 10 is concerned, it is almost mechanical for the Adjudicating Authority to admit the same because in all such cases there is hardly any objector. Same is the position at present. On admission, Corporate Insolvency Resolution Process shall commence henceforth, and IRP shall be appointed. He shall constitute COC and convene the meeting. For the purpose of collection of necessary details for preparation of “Information Memorandum” as prescribed U/s 29 of the Code, it is hereby directed that the Corporate Debtor /petitioner shall immediately furnish the documents and financial data to the appointed IRP so that the requisite information memorandum can be prepared and to be placed before the COC. This Bench is of the view that there is no requirement of publication to invite EoI. It can be said to be a path-breaking view, but according to my understanding, it is the only recourse available because in this case that exercise had already been completed under SIC Act. There is no requirement for inviting Resolution Plans in this case - the situation in this case is that a Resolution Plan is already in existence. Not only that the said resolution plan is in existence, but it was duly acted upon. The said resolution plan was already considered by the bankers during SARFAESI proceedings. Those very bankers are now going to constitute CoC under Insolvency Code. This very ‘Consortium’ has already acknowledged and accepted the resolution plan, hence, the right recourse available is to consider that Resolution Plan as if a resolution plan U/s 30 of the Code. Whether this petition be admitted or not stands answered in view of the fact that the petitioner being a ‘Corporate Person’ U/s 3(7), having outstanding debts, therefore, falls within the definition of ‘Corporate Debtor’ U/s 3(8) & there was a ‘Default’ of non-payment of outstanding debt as per the terms of Sec. 3(12). Therefore, this petition is fit for admission U/s 10 of the Code.The Petition is hereby “Admitted”. The commencement of the Corporate Insolvency Resolution Process shall be effective from the date of order. Issues Involved:1. Whether the present Section 10 application is to be treated as continuation of BIFR proceedings on repeal of SICA.2. Whether the DRS Scheme is to be treated as a resolution plan for the revival of this corporate applicant.3. Whether this petition deserves admission.Issue-wise Detailed Analysis:1. Continuation of BIFR Proceedings on Repeal of SICA:The Corporate Applicant initially filed a reference before BIFR on 02.06.2011, and BIFR declared the company as a 'sick industrial company' on 12.03.2012. A Modified DRS was submitted on 01.07.2016. However, with the repeal of SICA on 01.12.2016, the proceedings before BIFR stood abated. The Corporate Applicant then filed a writ petition challenging the validity of the amended Section 4(b) of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003, which was dismissed. The High Court directed the Corporate Applicant to apply for condonation of delay in filing insolvency proceedings within 180 days to the NCLT. Consequently, the Corporate Applicant filed the current application under Section 10 of the Insolvency and Bankruptcy Code (IBC).2. DRS Scheme as a Resolution Plan:The Corporate Applicant sought to treat the MDRS submitted before BIFR as a Resolution Plan under Section 30 of the IBC. The Tribunal noted that similar relief had been granted in the case of S.M. Dyechem Limited, where the MDRS pending before BIFR was treated as an approved Resolution Plan under the IBC. The Tribunal emphasized that the steps taken under SICA should not be ignored but rather considered for a speedy resolution under the IBC. The Tribunal concluded that the Resolution Plan already in existence and acted upon should be treated as a Resolution Plan under Section 30 of the IBC.3. Admission of the Petition:The Tribunal found that the Corporate Applicant had committed a default in repaying the outstanding debt, thus fulfilling the criteria for admission under Section 10 of the IBC. The Tribunal appointed an Interim Resolution Professional (IRP) and directed the commencement of the Corporate Insolvency Resolution Process (CIRP). The Tribunal also noted that there was no requirement for publication to invite Expressions of Interest (EoI) as the exercise had already been completed under SICA.Findings:The Tribunal concluded that the Section 10 application should be treated as a continuation of BIFR proceedings, and the MDRS should be treated as a Resolution Plan under the IBC. The petition was admitted, and the CIRP was initiated with the appointment of an IRP. The Tribunal directed the Corporate Debtor to furnish necessary documents and financial data to the IRP for the preparation of the Information Memorandum. The Tribunal emphasized that the Resolution Plan already in existence should be considered, thereby simplifying and expediting the CIRP.Order:The petition was admitted, and the commencement of the CIRP was declared effective from the date of the order. The IRP was directed to comply with the provisions of the IBC and submit a compliance report within 30 days. The provisions of Moratorium under Section 14 of the IBC were made operative, prohibiting the institution of any suit before a court of law and the transfer/encumbrance of any assets of the Debtor. The supply of essential goods or services to the Corporate Debtor was not to be terminated during the Moratorium period.