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 conditions under Section 7(5) of the Insolvency and Bankruptcy Code were satisfied. A default had occurred, the application was complete, and no disciplinary proceedings were pending against the proposed Interim Resolution Professional (IRP). A moratorium was declared under Section 14(1) of the Code, directing the IRP to take control of the debtor's assets, manage its affairs, prepare an inventory, and constitute a Committee of Creditors. Regular progress reports to be submitted to the tribunal every fortnight.

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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.

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