2020 (12) TMI 464 - Tri - Insolvency and Bankruptcy

Application for Corporate Insolvency Process Dismissed Due to Procedural Lapses and Non-Disclosure

M/s. Prithivraj Spinning Mill Private Limited Versus Indian Overseas Bank, State Bank of India and Induslnd Bank Ltd.

The Tribunal dismissed the application for Corporate Insolvency Resolution Process (CIRP) under Section 10 of IBC, 2016, due to incomplete Form-VI and ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - concealment and suppression of the material fact by the Applicant Company - the name of the Corporate Applicant is changed, however has failed to state or disclose such fact in Form - VI - HELD THAT:- It is seen that as per the records of this Adjudicating Authority, the name of the Corporate Applicant is M/s. Prithviraj Spinning Mills Private Limited. As per the Companies Act 2013, when the name of the company is changed the erstwhile name should also be reflecting for a period of two years. However, when the order of the Hon'ble NCLAT was placed before us, it is seen that the name of the Corporate Debtor is reflected as M/s. Marappar Textiles Private Limited, but the erstwhile name has not been reflected in the said order. In the said circumstances, this Tribunal is nor apprised of the fact as to whether the Applicant in the application has mentioned the erstwhile name of the company. Since the name of the Corporate Debtor in the order of Hon'ble NCLAT was reflected only as M/s. Marappar Textiles Private Limited, considerable time was spent in tracing out this application, since no application is pending before this Adjudicating Authority in the name of 'M/s. Marappar Textiles Private Limited'. Further, Form-VI of the Application stands in the name of M/s. Prithviraj Spinning Mills Private Limited and the registered office does not match with the Master Data of the Ministry of Company Affairs. The Applicant after deciding to submit itself for initiation of CIRP under Section 10 of IBC, 2016, has decided to change its name, thereafter obtaining a fresh Certificate of Incorporation, decided to go another step to change the Registered Office address and also pending adjudication has settled the dues of the 2nd Respondent alone. Whether a fresh liability was incurred or paid out of its own sources is not available. However, since the Applicant is under huge debt, it might have incurred fresh debt, on the verge of going into CIRP. From the flow of event as to the present case, it is necessary to relook at the provisions of Section 10 of IBC, 2016 and tighten the same to avoid misuse as done in the present case - Section 10(4)(b) of IBC, 2016 contemplates that this Adjudicating Authority has the right to reject the Application if it is incomplete. As already stated supra, inspite of opportunity being granted, the Form - VI as filed by the Applicant is incomplete in all respects. Further, this Adjudicating Authority also cannot pass an order of CIRP as against M/s. Prithviraj Spinning Mills Private Limited since the name of the Company is not in existence as on date. Application dismissed. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 10 of IBC, 2016.2. Non-disclosure of change of name and registered office address by the Corporate Applicant.3. Settlement of dues with one creditor while ignoring others.4. Filing of incomplete Form-VI.5. Filing of additional applications by the Corporate Applicant.6. Misuse of Section 10 of IBC, 2016.Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 10 of IBC, 2016:This application was filed to initiate CIRP for the Corporate Debtor, M/s. Prithivraj Spinning Mill Private Limited, under Section 10 of IBC, 2016. The Tribunal observed procedural compliance issues, including the absence of representation from one of the Financial Creditors (State Bank of India) and the need for additional documentation such as the minutes of the EoGM and attendance sheets.2. Non-disclosure of change of name and registered office address by the Corporate Applicant:The Corporate Applicant changed its name to M/s. Marappar Textiles Private Limited and shifted its registered office address after filing the application but failed to disclose these changes in Form-VI. This was deemed a concealment and suppression of material facts, which could mislead creditors and affect the public announcement required under Section 15 of IBC, 2016.3. Settlement of dues with one creditor while ignoring others:The Corporate Applicant settled the dues with the 2nd Respondent (State Bank of India) but did not clarify how the payment was made or whether other creditors were aware of the pending application. This selective settlement raised questions about the Applicant's intentions and the potential misuse of the CIRP process to defraud other creditors.4. Filing of incomplete Form-VI:The application was incomplete as the amended Form-VI reflecting the change in the company's name and registered office was not filed, despite multiple opportunities provided by the Tribunal. The Tribunal emphasized that an incomplete application under Section 10 of IBC, 2016, could be rejected as per Section 10(4)(b).5. Filing of additional applications by the Corporate Applicant:The Corporate Applicant filed additional applications to avoid payment of dues to the Tamil Nadu Electricity Board and to restrain creditors from invoking the SARFAESI Act, 2002. The Tribunal noted that these applications were not disclosed during the hearings, indicating a lack of transparency.6. Misuse of Section 10 of IBC, 2016:The Tribunal concluded that the Corporate Applicant misused Section 10 of IBC, 2016, by altering its financial status, changing its name and address, and selectively settling dues. The Tribunal suggested tightening the provisions of Section 10 to prevent such misuse and emphasized the need for the Applicant to maintain the status quo after filing the application.Conclusion:The Tribunal dismissed the application filed under Section 10 of IBC, 2016, due to the incomplete Form-VI and the non-existence of the company name as per the records. The Tribunal also closed all connected applications and directed the Registry to communicate the order to the Insolvency and Bankruptcy Board of India (IBBI).