2020 (3) TMI 98 - Tri - Insolvency and Bankruptcy

Tribunal Admits Insolvency Petition, Declares Moratorium, Appoints Resolution Professional

Bank of Baroda Versus Gaurinandan Fashion (P.) Ltd.

The Tribunal admitted the petition under section 7 of the Insolvency and Bankruptcy Code, 2016, finding it complete and establishing the debt and default. ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Existence of debt and default or not - HELD THAT:- On perusal of the records it is found that from time to time the corporate debtor has made payments towards the outstanding. That, the last payment is made by the corporate debtor on 31st October, 2017, towards interest which is reflected in the statement at page No. 454 to the application. That, the documents filed along with the application is sufficient to prove that there exists financial debt - Though the respondent has tried to refute the statement made by the applicant, could not succeed to defend himself because no convincing documents are being filed so as to believe that the corporate debtor is not a defaulter. The Adjudicating Authority is of the considered view that there is a debt due to 'financial creditor' and there is default on the part of the corporate debtor - That, the application is found to be complete in all respect. Hence it does not warrant any rejection or dismissal. The application under section 7 (2) of the IB Code is complete in all respects and there is debt due to the 'Financial Creditor' and there is default on the part of the 'corporate debtor'. Hence, there is no alternative but to admit the application in absence of any infirmity - Application admitted - moratorium declared. Issues Involved:1. Validity of the petition under section 7 of the Insolvency and Bankruptcy Code, 2016.2. Authorization of the signatory of the petition.3. Classification of the respondent's account as Non-Performing Asset (NPA).4. Completeness and correctness of Form 1 submitted by the applicant bank.5. Appointment of the Interim Resolution Professional (IRP).6. Declaration of moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016.Issue-wise Detailed Analysis:1. Validity of the petition under section 7 of the Insolvency and Bankruptcy Code, 2016:The petition was filed by Bank of Baroda under section 7 of the Insolvency and Bankruptcy Code, 2016, seeking reliefs under sections 7(5)(a) and 13(1)(a)(b)(c) of the Code. The Tribunal found that the application was complete in all respects and that there was a debt due to the financial creditor, with default on the part of the corporate debtor. The Tribunal referenced the Supreme Court judgment in Innoventive Industries Ltd. v. ICICI Bank, which clarified that the insolvency resolution process begins when a default occurs, defined broadly under section 3(12) of the Code. The Tribunal concluded that the petition deserved to be admitted.2. Authorization of the signatory of the petition:The respondent contested that the signatory of the petition was not authorized to file it. However, the Tribunal found that the letter of authority dated 12.09.2018, issued by the General Manager of the applicant bank authorizing Mr. Tapan Kumar Paul, was proper and valid. Thus, the objection was overruled.3. Classification of the respondent's account as Non-Performing Asset (NPA):The respondent argued that their account was never classified as NPA and that the classification by the applicant bank was under challenge before DRT-II, Ahmedabad. However, the Tribunal found that the documents submitted by the applicant bank, including the statement of accounts and notices issued, were sufficient to prove the existence of financial debt and default. The Tribunal noted that the corporate debtor had made the last payment towards interest on 31st October 2017, and the account was classified as NPA on 31.10.2017.4. Completeness and correctness of Form 1 submitted by the applicant bank:The respondent contended that Form No. 1 was not correctly filled out, warranting rejection of the application. Nevertheless, the Tribunal found that the application was complete in all respects, including the submission of all required documents and records. The Tribunal referenced the Supreme Court judgment in Mobilox Innovations (P) Ltd. v. Kirusa Software (P.) Ltd., which emphasized that the adjudicating authority only needs to see the records of the information utility or other evidence produced by the financial creditor to be satisfied that a default has occurred.5. Appointment of the Interim Resolution Professional (IRP):The applicant proposed the name of Mr. Bhupendra Singh Narayan Singh Rajput as the IRP. The Tribunal appointed him as the Interim Resolution Professional under section 13(1)(c) of the Code, noting that Form 2 of the proposed IRP was annexed, and there were no pending disciplinary proceedings against him.6. Declaration of moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016:The Tribunal declared a moratorium prohibiting the institution or continuation of suits or proceedings against the corporate debtor, transferring or disposing of any assets, and recovering any property by an owner or lessor. The moratorium would be effective from the date of receipt of the authenticated copy of the order until the completion of the corporate insolvency resolution process or until an order for liquidation is passed under section 33.Conclusion:The Tribunal admitted the petition under section 7 of the Insolvency and Bankruptcy Code, 2016, and declared a moratorium. The application was found to be complete, and the debt and default were established. The Interim Resolution Professional was appointed, and the petition was disposed of with no order as to costs.