2020 (3) TMI 23 - Tri - Insolvency and Bankruptcy

SBI initiates insolvency proceedings against Shree Ambica International Food Co. for debt default

The State Bank of India filed an application under Section 7 of the Insolvency & Bankruptcy Code, 2016 against M/s Shree Ambica International Food ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- Since most of the exposure of the Respondent company was by way of consortium finance, and there is no bar for the applicant to approach this Hon'ble Tribunal for initiating resolution process without seeking consent of other lenders. There is sufficient evidence to prove default. The applicant has specified the name of the resolution professional and has annexed Form 2, the consent of the proposed IRP to the application accordingly. Petition admitted - moratorium declared. Issues:1. Application under Section 7 of the Insolvency & Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process.2. Default on financial debt by the respondent company.3. Allegations of financial mismanagement by the respondent.4. Appointment of Interim Resolution Professional and declaration of moratorium.5. Compliance requirements and obligations during the insolvency resolution process.Analysis:Issue 1: Application under Section 7 of the Insolvency & Bankruptcy Code, 2016The State Bank of India filed an application under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking to trigger the Corporate Insolvency Resolution Process (CIRP) against the respondent company, M/s Shree Ambica International Food Company Private Limited. The application detailed the financial debt owed by the respondent and the grounds for initiating insolvency proceedings.Issue 2: Default on financial debt by the respondent companyThe financial creditor provided evidence of default amounting to Rs. 1,44,87,98,629.89 along with details of loans disbursed and dates of disbursement. The respondent company allegedly failed to maintain financial discipline, leading to the account being declared a Non-Performing Asset (NPA). The respondent countered by citing losses in the rice industry and alleged mistreatment by the creditor, resulting in delayed payments and financial crisis.Issue 3: Allegations of financial mismanagement by the respondentThe respondent claimed suffering significant losses due to unavailability of promised working capital funds and unilateral actions by the applicant bank, including freezing accounts without notice. The respondent's defense highlighted issues with interest subvention and penal charges imposed by the bank, leading to financial difficulties and loss of market trust.Issue 4: Appointment of Interim Resolution Professional and declaration of moratoriumThe Tribunal admitted the application, appointed an Interim Resolution Professional, and declared a moratorium under Section 14 of the Code. The moratorium imposed restrictions on legal actions against the corporate debtor and asset transfers. The Interim Resolution Professional was tasked with managing the affairs of the respondent company during the insolvency resolution process.Issue 5: Compliance requirements and obligations during the insolvency resolution processThe Tribunal emphasized the strict adherence to legal obligations by all parties involved in the insolvency resolution process. The Interim Resolution Professional was directed to follow prescribed sections of the Code diligently and ensure fairness and integrity in the resolution process. The financial creditor was required to deposit funds for immediate expenses, subject to approval by the Committee of Creditors.This comprehensive analysis outlines the key legal aspects and proceedings of the judgment delivered by the National Company Law Tribunal in the matter of insolvency proceedings against the respondent company.