Tribunal Admits Insolvency Petition, Initiates Corporate Resolution Process

The Tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to default in loan repayments, leading to the account being classified as a Non-Performing Asset (NPA). The appointed Interim Resolution Professional (IRP) was directed to adhere to time limits for completing the CIRP, with emphasis on finding a viable resolution plan. The Tribunal highlighted the importance of exploring settlement options and suggested considering maximum interest at the bank's MCLR rate without penal interest.

---

---

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.

---