2019 (10) TMI 821 - Tri - Insolvency and Bankruptcy

Tribunal Grants Moratorium, Appoints Resolution Professional under Insolvency Code

JM Financial Asset Reconstruction Company Limited Versus Tiger Surgical Disposable Private Limited

The tribunal admitted the petition under the Insolvency and Bankruptcy Code, declared a moratorium, and appointed an Interim Resolution Professional. The ... Maintainability of application - initiation of CIRP - Non-performing asset - section 7 of The Insolvency and Bankruptcy Code, 2016 read with Rule 4 of The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT:- On perusal of the records it is found that, from time to time, at the instance of the respondent, the applicant bank had enhanced and rescheduled such facilities. That, due to non-payment of the debts account of the corporate debtor was classified as Non-Performing Assets on 31st March, 2013. The plea of limitation taken by the corporate debtor is not maintainable in view of the fact that before expiry of three years’ period, the corporate debtor acknowledged the debts. Moreover, objection raised by the corporate debtor that the petitioner cannot be permitted to pursue two parallel proceedings is unfounded. The pendency of proceedings before any other fora as mentioned in the Code much less before the Arbitrator would not cause any impediment with regard to initiation of corporate insolvency resolution process because under Section 7 of the Code pendency of such proceedings is no bar to the admission of the petition and initiation of corporate insolvency resolution process. In the instant application, from the material placed on record by the Applicant, this Authority is satisfied that the Corporate Debtor committed default in paying the financial debt to the Applicant - On perusal of record, it is held that there is existence of default and that the application under Section 7(2) of the Code is also complete in all respect. The petitioner/financial creditor having fulfilled all the requirements of Section 7 of the Code, the instant petition deserves to be admitted - petition admitted - moratorium declared. Issues Involved:1. Timeliness of the petition under Section 238A of the Insolvency and Bankruptcy Code (IBC).2. Alleged negligence and misconduct by UCO Bank.3. Unilateral increase in interest rates by UCO Bank.4. Validity of the assignment of debt to JM Financial Asset Reconstruction Company Limited.5. Existence of default and completeness of the application under Section 7 of the IBC.Issue-wise Detailed Analysis:1. Timeliness of the Petition:The respondent argued that the petition is time-barred under Section 238A of the IBC, as the debt fell due on 29.04.2013. However, the tribunal found that the debt was acknowledged by the corporate debtor within the three-year limitation period through various communications and financial statements. Therefore, the plea of limitation was not maintainable.2. Alleged Negligence and Misconduct by UCO Bank:The respondent contended that UCO Bank's negligence resulted in non-receipt of payment from Pro-Pharma Corporation Limited and the loss of four cheques amounting to Rs. 2,26,396/-. Additionally, the bank unilaterally raised the interest rate from 14.5% to 18% without notice. The tribunal noted these contentions but focused on the primary issue of default and the assignment of debt.3. Unilateral Increase in Interest Rates by UCO Bank:The respondent claimed that UCO Bank increased the interest rate without any notice or consent. Despite these allegations, the tribunal emphasized that the core issue was the default on the financial debt and the subsequent assignment of this debt to JM Financial Asset Reconstruction Company Limited.4. Validity of the Assignment of Debt:The tribunal reviewed the registered assignment agreement dated 26th March 2014, between UCO Bank and JM Financial Asset Reconstruction Company Limited, which transferred the outstanding dues and underlying security interest to the financial creditor. The tribunal found the assignment to be valid and binding.5. Existence of Default and Completeness of the Application:The tribunal confirmed that the corporate debtor committed default in paying the financial debt. The application under Section 7 of the IBC was found to be complete in all respects, including the prescribed Form-1 and the proposed name of the Resolution Professional. The tribunal cited the Supreme Court judgment in Innoventive Industries Ltd. v. ICICI Bank & Anr., which clarified that the adjudicating authority only needs to verify that a default has occurred.Conclusion:The tribunal admitted the petition, declared a moratorium under Section 14 of the IBC, and appointed Mr. Hiten M. Parikh as the Interim Resolution Professional. The moratorium prohibits the institution or continuation of suits, transferring or disposing of assets, and recovery actions against the corporate debtor. The supply of essential goods and services to the corporate debtor must continue during the moratorium period. The order will remain effective until the completion of the corporate insolvency resolution process or until a resolution plan is approved or liquidation is ordered.Final Orders:The petition was admitted, and a moratorium was declared. The tribunal directed that the supply of essential goods and services should not be interrupted during the moratorium period. The order will remain effective until the completion of the insolvency resolution process or further orders. The petition was disposed of with no order as to costs, and any pending interim applications were rendered infructuous.