Punjab National Bank vs. Divine Alloys: Insolvency Application & Appointment of Interim Resolution Professional

The Financial Creditor, Punjab National Bank, filed an application under Section 7 of the Insolvency and Bankruptcy Code against the Corporate Debtor, M/s Divine Alloys & Power Co. Ltd., for defaulting on a significant financial debt. The Corporate Debtor admitted the default, leading to the appointment of an Interim Resolution Professional and the declaration of a moratorium. Specific prohibitions were imposed during the moratorium period, and a time-bound Corporate Insolvency Resolution Process was directed to be conducted. Mr. Rajesh Kumar Agarwal was appointed as the Interim Resolution Professional to oversee the process efficiently.

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Issues:
1. Application under Section 7 of Insolvency and Bankruptcy Code filed by Financial Creditor against Corporate Debtor for default in payment.
2. Admission of outstanding loan amount and default by Corporate Debtor.
3. Appointment of Interim Resolution Professional and declaration of moratorium.
4. Specific prohibitions during moratorium period.
5. Direction for time-bound Corporate Insolvency Resolution Process.

Analysis:
1. The Financial Creditor, Punjab National Bank, initiated the application under Section 7 of the Insolvency and Bankruptcy Code against the Corporate Debtor, M/s Divine Alloys & Power Co. Ltd., due to the Corporate Debtor's default in repaying financial debt exceeding Rs. 461.08 crores, sourced from various banks. The Financial Creditor, as the lead bank in the consortium, was directed to commence the Corporate Insolvency Resolution Process (CIRP) during a Joint Lenders Meeting held on 05.10.2018.

2. The Financial Creditor presented evidence of the Corporate Debtor's outstanding loan amount as of 31.07.2018, totaling Rs. 576,18,80,073. Despite repeated demands, the Corporate Debtor failed to fulfill its financial obligations, leading to the initiation of the insolvency proceedings.

3. Upon service of the application on the Corporate Debtor, their representative expressed the Corporate Debtor's decision not to file an affidavit-in-reply. Following a thorough review of the records and proceedings, the Adjudicating Authority, Shri M.B. Gosavi, Member (J), found that the Financial Creditor's application was devoid of defects and admitted it. The Authority declared a moratorium and public announcement in accordance with the Insolvency and Bankruptcy Code.

4. The moratorium imposed specific restrictions, including the prohibition of instituting or continuing legal proceedings against the Corporate Debtor, transferring or disposing of assets, enforcing security interests, or recovering property during the moratorium period. Essential goods or services to the Corporate Debtor were to be maintained without interruption, subject to government notifications.

5. The order appointed Mr. Rajesh Kumar Agarwal as the Interim Resolution Professional to oversee the CIRP, ascertain creditors' details, and convene a Committee of Creditors for devising a resolution plan. The Financial Creditor was directed to pay an advance fee to the Resolution Professional, and the CIRP was mandated to be conducted in a time-bound manner as per regulatory provisions. The Registry was tasked with communicating the order to all relevant parties and scheduling a progress report filing for the future.

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