Tribunal Denies Application for Corporate Insolvency Resolution Process Due to Financial Discrepancies and Doubts

The Tribunal dismissed the Application filed by a Private Limited Company under Section 10 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) due to discrepancies in financial statements and doubts regarding the Applicant's intentions. Despite opportunities to rectify defects, persistent discrepancies led the Tribunal to conclude that the Application was unfit for consideration based on the presented circumstances, emphasizing the Code's purpose for resolution over asset protection through ulterior motives.

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Issues:
- Application filed under Section 10 of the Insolvency and Bankruptcy Code, 2016 by a Corporate Applicant seeking to initiate the Corporate Insolvency Resolution Process (CIRP) on its own.

Detailed Analysis:
1. The Applicant, a Private Limited Company, filed an Application invoking Section 10 of the I&B Code, 2016, due to a default by a principal borrower to Bank of Baroda, for which the Applicant had guaranteed repayment. The Applicant sought to declare moratorium and appoint an Interim Resolution Professional.
2. The Applicant owns a property under development in Pondicherry and, due to guarantee obligations, filed the Application to protect the asset. The Application detailed the Corporate Applicant's incorporation, capital, and registered office.
3. The Application disclosed financial/operational debt details totaling Rs. 55,18,00,000, with Rs. 42,74,57,817 in default as of January 31, 2019. The consolidated statement of dues listed Financial Creditors, Operational Creditors, and Statutory Dues.
4. The Financial Creditor, Bank of Baroda, issued an E-auction Sale Notice mentioning the Corporate Guarantors, including the Corporate Applicant. The Financial Creditor supported initiating CIRP against the Corporate Debtor under Section 10 of the Code.
5. The Financial Creditor highlighted discrepancies in the amount mentioned and the failure to disclose collateral securities, alleging the Applicant's intention to defeat recovery measures. The Financial Creditor initiated SARFAESI measures and auctioned Secured Assets.
6. The Tribunal referred to a judgment emphasizing adherence to prescribed records and information under Section 10 and Form 6 rules. The Applicant's financial statements raised concerns about revenue, stock, and purchases.
7. Discrepancies in records, especially in Audited Balance Sheets, raised doubts about the Application's veracity. The Tribunal noted its duty to scrutinize documents filed by the Applicant and ensure compliance with prescribed forms and rules.
8. Despite opportunities to rectify defects, persistent discrepancies in documents related to financial statements cast doubts on the Application's credibility. The Tribunal emphasized the I&B Code's purpose for resolution, not asset protection through ulterior motives.
9. Considering the discrepancies and ulterior motives, the Tribunal dismissed the Application under Section 10 of the I&B Code, 2016, without costs, as it deemed unfit for consideration based on the circumstances presented.

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