2020 (10) TMI 8 - Tri - Insolvency and Bankruptcy

Tribunal Admits Insolvency Petition, Initiates Corporate Resolution Process

Bank of India Versus M.P. Agro Brk Energy Foods Limited

The Tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, initiating the Corporate Insolvency Resolution Process (CIRP) ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to amke repayment of its dues - existence of debt and dispute or not - pendency of SARFAESI proceeding - HELD THAT:- The present application has been filed by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy before this Adjudicating Authority to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor - It may not be out of place mention here that the Corporate Debtor has been declared as Willful Defaulter by the Bank of Baroda, which categorically demonstrates the intentions of the Corporate Debtor. It is a settled legal position that the pendency of SARFAESI proceeding or other disputes do not prevent a Financial Creditor to trigger the C.I.R.P. because the nature of remedy being sought for under the provisions of the I.B. Code is 'Remedy in Rem' in respect of the CD. The Cash Credit and Term Loan facilities were sanctioned by the Petitioner Bank and the same were availed by CD, M.P. Agro BRK Energy Foods Limited. The Charges have been filed by the CD with RoC and the Financial Creditor has filed valuation report and search report - The CD has defaulted in making repayment of loan/credit facilities to the Petitioner Bank and the date of default is 30.09.2017. The Statement of accounts and the CIBIL Reports submitted by the applicant Bank confirm the debt is due and default has been committed by the Corporate Debtor - The Petitioner Bank has filed the petition within the period of limitation, as the last credit has come to the account on 31.08.2018 when this application has been filed on 22.10.2018 which is within 3 years of last payment. The present I.B. Petition is filed by the duly authorised official of the Applicant Bank in a prescribed format under Section 7 of the I.B. Code annexing copies of loan documents confirming the existence of debt due and defaulted and proposed a name of Resolution Professional to act as an Interim Resolution Professional (IRP). This Adjudicating Authority is satisfied that, (a) The Corporate Debtor availed the loan /credit facilities from the Financial Creditor Bank. (b) Existence of debt is above Rs. One Lac; (c) Debt is due; (d) Default has occurred on 30/09/2017; (e) Petition had been filed within the limitation period as the last payment of INR.2,50,000.00 has come to the account on 31.08.2018 whereas this petition has been filed on 22.10.2018; (f) Copy of the Application filed before the Tribunal has been sent to the Corporate Debtor and the application filed by the Petitioner Bank Under Section 7 of IBC is found to be complete for the purpose of initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. (g) The Applicant's submission in IA 249 of 2019 that no such settlement proposal is pending before the Financial Creditor is taken record IA is thereby disposed of. Hence, the present IB Petition is admitted with the following Directions/observations. The date of admission of this petition is 05.03.2020 - 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 loans and classification of the account as Non-Performing Asset (NPA).3. Validity of classification of the account as NPA.4. Settlement proposals and their rejection.5. Appointment of Interim Resolution Professional (IRP).6. Declaration of moratorium under Section 13 and 14 of the IBC.7. Compliance with procedural requirements and submission of necessary documents.Issue-wise Detailed Analysis:1. Initiation of CIRP under Section 7 of the IBC:The Financial Creditor (Bank of India) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor (M.P. Agro BRK Energy Foods Limited) for default in repayment of term loans and credit facilities.2. Default in Repayment and Classification as NPA:The Corporate Debtor had availed various credit facilities, including Cash Credit (CC) and Term Loans, amounting to INR 11.75 Crores since 2014. Despite support from the Financial Creditor, the Corporate Debtor failed to comply with the repayment obligations, leading to the account being classified as a Non-Performing Asset (NPA) on 30.09.2017, as per RBI guidelines. The outstanding amount due was INR 11,57,89,697.00.3. Validity of Classification as NPA:The Respondent argued that the classification of the account as NPA was incorrect and illegal, citing a circular issued by the Reserve Bank of India (RBI) dated 07.02.2018. The Respondent claimed that the classification did not comply with the RBI circular's conditions, which protected MSME units from being classified as NPA based on 90-day and 120-day delinquency norms if certain conditions were met. The Respondent provided evidence that it met these conditions, including being an MSME unit and having a standard account as of 31.01.2017.4. Settlement Proposals and Rejection:The Corporate Debtor had offered various settlement proposals during the pendency of the petition, which were supported by the Financial Creditor. However, the latest One-Time Settlement (OTS) proposal failed due to non-compliance with the terms and conditions by the Corporate Debtor. The Financial Creditor rejected the proposal on 07.10.2019.5. Appointment of Interim Resolution Professional (IRP):The Tribunal appointed Ms. Teena Saraswat Pandey as the Interim Resolution Professional (IRP) to oversee the CIRP process. The IRP was directed to make a public announcement of the moratorium and follow the provisions under Sections 13 and 14 of the IBC.6. Declaration of Moratorium:The Tribunal declared a moratorium with effect from 05.03.2020, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovery of property by owners or lessors. The supply of essential goods or services to the Corporate Debtor was not to be terminated during the moratorium period.7. Compliance with Procedural Requirements:The Financial Creditor submitted all necessary documents, including loan sanction documents, statements of accounts, CIBIL reports, and a certificate under the Banker's Book of Evidence Act, 1891. The petition was filed within the limitation period, and the application was found to be complete for initiating the CIRP.Order:The Tribunal admitted the petition, initiating the CIRP against the Corporate Debtor. The IRP was directed to adhere to the time limits for completing the CIRP and perform duties as specified under the IBC. The Registry was instructed to communicate the order to all relevant parties.Observations:The Tribunal observed that the Corporate Debtor had defaulted on loan repayments, and the debt was due and payable. The petition was filed within the limitation period, and the application was complete. The Tribunal emphasized the importance of finding a viable resolution plan for the Corporate Debtor and suggested exploring the possibility of loading maximum interest at the bank's MCLR rate without penal interest.The petition filed under Section 7 of the IBC was admitted, and the CIRP was initiated with the above directions and observations.