Corporate Debtor enters CIRP under Insolvency Code, IRP appointed for asset protection

The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016. Mr. Srikanth Dwarkanath was appointed as the Interim Resolution Professional (IRP), and a moratorium was imposed to protect the Corporate Debtor's assets. The IRP was tasked with managing the Corporate Debtor's operations and preserving its property value. The Financial Creditor was directed to pay an advance to the IRP, and the commencement of CIRP was effective immediately. The application for malicious initiation of CIRP was dismissed, and the relevant orders were communicated to all parties involved.

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Issues Involved:
1. Delay and adjournments in proceedings.
2. Liability of the corporate guarantor post-approval of the resolution plan.
3. Maintainability of the application under Section 7 of IBC, 2016.
4. Appointment of Interim Resolution Professional (IRP).
5. Claims of malicious initiation of CIRP.

Detailed Analysis:

1. Delay and Adjournments in Proceedings:
The application CP(IB) 141 of 2019 was filed on 01.02.2019. The matter faced multiple adjournments, often at the request of the Corporate Debtor's counsel. Despite several opportunities and directives, the Corporate Debtor delayed filing an affidavit in reply. The Tribunal noted that these delays appeared to be a tactic to postpone the hearing. Eventually, the matter was reserved for order considering the written submissions already on record.

2. Liability of the Corporate Guarantor Post-Approval of the Resolution Plan:
The Corporate Debtor was a guarantor for a loan given to M/s. Korba West Power Company Limited. The Financial Creditor argued that the corporate guarantee was not extinguished upon the approval of the resolution plan. References were made to the Supreme Court decision in Lalit Kumar Jain vs. Union of India, which held that approval of a resolution plan does not discharge a guarantor of liability. The NCLAT decision in State Bank of India vs. Athena Energy Ventures Pvt. Ltd. also supported the simultaneous pursuit of claims against both the principal borrower and the guarantor.

3. Maintainability of the Application Under Section 7 of IBC, 2016:
The Tribunal found that there was a debt due and payable, and a default had occurred. Therefore, the application by the Financial Creditor was deemed maintainable. The Tribunal emphasized that the liability of the corporate guarantor is independent of the principal borrower’s default and can be pursued simultaneously or independently. The Financial Creditor clarified that it was not seeking recovery of amounts already recovered under the resolution plan, which remained uncontroverted by the Corporate Debtor.

4. Appointment of Interim Resolution Professional (IRP):
The Financial Creditor proposed Mr. Srikanth Dwarkanath as the IRP, against whom no disciplinary proceedings were pending. The Tribunal admitted the Corporate Debtor into the Corporate Insolvency Resolution Process (CIRP) and appointed Mr. Dwarkanath as the IRP. The Tribunal also imposed a moratorium under Section 14 of the Code, prohibiting suits, proceedings, and actions against the Corporate Debtor’s assets.

5. Claims of Malicious Initiation of CIRP:
The Corporate Debtor alleged that the CIRP was initiated with malicious intent. However, the Tribunal found no merit in these allegations. The Tribunal dismissed I.A. 513 of 2019, which contained these claims, and proceeded to admit the Corporate Debtor into CIRP.

Order:
1. The Corporate Debtor was admitted into CIRP under Section 7 of the IBC, 2016.
2. Mr. Srikanth Dwarkanath was appointed as the IRP.
3. A moratorium was imposed, effective from the date of the order, prohibiting suits and actions against the Corporate Debtor.
4. The IRP was directed to make a public announcement of the CIRP and call for claims.
5. The IRP was tasked with preserving the value of the Corporate Debtor’s property and managing its operations as a going concern.
6. The Financial Creditor was directed to pay the IRP an advance of Rs. 50,000.
7. The Registry was instructed to communicate the order to relevant parties and upload it on the website.
8. The commencement of CIRP was effective from the date of the order.
9. CP(IB) No. 141/7/NCLT/AHM/2019 was allowed and disposed of, while I.A. 513 of 2019 was dismissed.

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