Tribunal declares moratorium under Section 14, prohibits suits & asset transfers

The tribunal admitted the application, declaring a moratorium under Section 14 of the Insolvency and Bankruptcy Code. The order prohibited suits, asset transfers, and foreclosure actions, ensuring the supply of essential goods and services to the Corporate Debtor. The moratorium would remain in effect until the completion of the insolvency resolution process or a liquidation order is issued. The tribunal found the application complete, with an admitted debt and default, leading to the petition's admission without costs.

---

---

Issues Involved:
1. Validity of the Power of Attorney.
2. Calculation of interest rate.
3. Existence of debt and default.
4. Completeness of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Validity of the Power of Attorney:
The respondent contested the validity of the Power of Attorney (PoA) executed by the applicant company, arguing that it was signed by two directors without a supporting Board Resolution. However, the tribunal found that the PoA, signed by two directors authorizing the holder to initiate insolvency proceedings, was sufficient.

2. Calculation of Interest Rate:
The respondent objected to the interest rate calculation, noting a discrepancy between the agreed rate of 10.25% p.a. as per the common loan agreement and the 14.75% p.a. calculated by the applicant from March 2014. The tribunal referred to the Hon’ble NCLAT decision in Naveen Luthra v. Bell Finvest (India) Ltd., which held that an application under Section 7 of the IB Code cannot be rejected on the grounds of "usurious and extortionate penal interest." The tribunal concluded that the interest rate issue did not invalidate the application.

3. Existence of Debt and Default:
The tribunal emphasized that the Code's scheme ensures the initiation of the Insolvency Resolution Process upon the occurrence of a default, defined broadly as non-payment of a debt when due. The tribunal cited the Hon’ble Supreme Court decision in Innoventive Industries Ltd. v. ICICI Bank, which clarified that the adjudicating authority must admit an application if satisfied that a default has occurred, provided the application is complete. The tribunal noted that the respondent had admitted the debt in various communications, including letters proposing one-time settlements and requesting operational continuance.

4. Completeness of the Application:
The tribunal confirmed that the application was complete, filed in the prescribed Form-1, and accompanied by the necessary documents, including the proposed Interim Resolution Professional's details. The tribunal found no infirmity in the application, satisfying the requirements of Section 7 of the Code.

Conclusion:
The tribunal concluded that the application was complete and that there was an admitted debt and default. Consequently, the petition was admitted, and a moratorium was declared under Section 14 of the Code, prohibiting suits, asset transfers, foreclosure actions, and recovery of property by owners or lessors. The tribunal directed that the supply of essential goods and services to the Corporate Debtor should not be interrupted during the moratorium period. The order would remain effective until the completion of the corporate insolvency resolution process or until an order for liquidation is passed.

Final Orders:
The petition was admitted, and the moratorium was declared. The tribunal disposed of the petition with no order as to costs and directed communication of the order to the relevant parties.

---