2020 (9) TMI 504 - Tri - Insolvency and Bankruptcy

Tribunal admits CIRP petition against Mir Kings Industries: Moratorium declared, IRP appointed

The tribunal admitted the petition for initiation of Corporate Insolvency Resolution Process (CIRP) against Mir Kings Industries Pvt. Ltd. as the ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Non-Performing Asset - HELD THAT:- Section 7(5) of the Code provides for admission of the application where the Adjudicating Authority is satisfied that (a) a default has occurred; (b) the application under sub-section (2) of Section 7 is complete; (c) there is no disciplinary proceedings pending against the proposed Resolution Professional. The first condition is that a default has occurred. The default in repayment of debt is supported by account statements filed by the bank at Annexure P6 and certificate under Section 2(A)(a) and 2(A)(b) of Bankers Book Evidence Act, 1891 in support of the account statements appended with the petition. It is the case of the respondent-corporate debtor that the account of the respondent-corporate debtor was wrongly declared as NPA while OTS proposal was kept pending by petitioner-bank. It is stated by the petitioner-bank that no payment has been made towards the settled amount and the bank has revocated such proposal accordingly - there are no merit in the contention of the respondent-corporate debtor and pendency of any OTS cannot be an embargo in triggering the provisions under the Code. The second condition is that the application under Section 7(2) is complete. We have discussed the contents of the application above and we conclude that the application is complete. The third condition is that there are no disciplinary proceedings pending against the proposed Resolution Professional. In the present case, Shri Neeraj Bhatia, has been proposed as interim Resolution Professional. Form 2 filed by the proposed Interim Resolution Professional is at Page 92 to 92A of the petition. Shri Neeraj Bhatia has certified that there are no disciplinary proceedings pending against him with the board or Indian Institute of Insolvency Professional of ICAI. He has also affirmed that he is eligible to be appointed as a Resolution Professional in respect of the corporate debtor in accordance with the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporation Persons) Regulations, 2016. In view of the satisfaction of the conditions provided for in Sections 7(5) of the Code, the petition for initiation of CIRP in the case of M/s Mir Kings Industries Private. Ltd. is admitted - petition admitted - moratorium declared. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Default in repayment of debt by the corporate debtor.3. Pre-existing disputes and their impact on CIRP initiation.4. Completeness of the application under Section 7(2).5. Disciplinary proceedings against the proposed Interim Resolution Professional (IRP).Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP):The petition was filed by the financial creditor, Jammu and Kashmir Bank, under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate CIRP against Mir Kings Industries Pvt. Ltd. The application was submitted in Form 1 as prescribed by Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.2. Default in Repayment of Debt:The corporate debtor had availed a term loan of Rs. 16.25 Crores and a working capital facility from the petitioner-bank. The loan account was declared Non-Performing Asset (NPA) on 31.03.2016. The financial creditor provided account statements and a certificate under the Bankers Book Evidence Act, 1891, showing the outstanding balance. The tribunal found no merit in the corporate debtor's contention that the account was wrongly declared as NPA due to a pending One Time Settlement (OTS) proposal, as no payment was made towards the settled amount.3. Pre-existing Disputes and Their Impact:The corporate debtor argued that there were pre-existing disputes based on two civil suits pending against the petitioner-bank. However, the tribunal noted that these suits were not for declaring that the corporate debtor was not liable to pay the debt but were related to the revocation of the OTS proposal. The tribunal referred to the NCLAT ruling in Karan Goel Versus M/s Pashupati Jewellers, emphasizing that the existence of a suit cannot be a ground to reject an application under Section 7 of the Code. Additionally, the tribunal cited the NCLAT decision in Binani Industries Limited Versus Bank of Baroda, stating that CIRP is not a money claim or litigation, and thus, the interim order in the civil suit could not prevent the initiation of CIRP.4. Completeness of the Application under Section 7(2):The tribunal examined the contents of the application and concluded that it was complete. The application included all necessary particulars such as the details of the applicant, the corporate debtor, the proposed IRP, the financial debt, and evidence of default.5. Disciplinary Proceedings Against the Proposed IRP:The proposed IRP, Mr. Neeraj Bhatia, certified that there were no disciplinary proceedings pending against him. The tribunal verified his credentials and found nothing adverse.Conclusion:The tribunal admitted the petition for initiation of CIRP against Mir Kings Industries Pvt. Ltd., satisfying the conditions under Section 7(5) of the Code:1. A default had occurred.2. The application was complete.3. No disciplinary proceedings were pending against the proposed IRP.The tribunal declared a moratorium in terms of Section 14(1) of the Code, prohibiting suits, asset transfers, and recovery actions against the corporate debtor. The IRP was directed to take control of the corporate debtor's assets and manage its affairs, prepare an inventory, and constitute a Committee of Creditors. Regular progress reports were mandated to be sent to the tribunal every fortnight. The order was communicated to both parties and the IRP.