2022 (2) TMI 143 - Tri - Insolvency and Bankruptcy

Tribunal Commences Corporate Insolvency Process: Moratorium in Place

The Tribunal admitted the Company Petition and ordered the commencement of Corporate Insolvency Resolution Process against the Corporate Debtor, ... Corporate Insolvency Resolution Process (CIRP) - admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - default under insolvency proceedings - moratorium - appointment of Interim Resolution Professional - duties of Interim Resolution Professional - management to cooperate with the IRP - time-bound completion of CIRPAdmission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - default under insolvency proceedings - Corporate Insolvency Resolution Process (CIRP) - The petition under Section 7 was admitted and CIRP initiated against the Corporate Debtor on account of default. - HELD THAT: - The Financial Creditor filed an application under Section 7 alleging non-payment of amounts due under invoices. The Corporate Debtor did not dispute the debt but sought time (6-7 months) for repayment and indicated liabilities to other creditors, demonstrating inability to pay presently. Having regard to the undisputed debt, the Corporate Debtor's inability to propose a viable repayment schedule and its existing indebtedness to other creditors, the Tribunal held that the facts constituted a default warranting initiation of CIRP and admitted the company petition. [Paras 5, 6]Company Petition admitted and Corporate Insolvency Resolution Process ordered to commence.Appointment of Interim Resolution Professional - moratorium - duties of Interim Resolution Professional - management to cooperate with the IRP - time-bound completion of CIRP - IRP appointed, moratorium declared, and directions issued for conduct and completion of CIRP within a time-frame. - HELD THAT: - Upon admission of the petition, the Tribunal appointed the nominated Insolvency Professional as Interim Resolution Professional and directed him to take charge of the Corporate Debtor's management and perform functions under the Code and Rules. A moratorium was declared in terms of the Code. The directors, promoters and persons associated with management were directed to extend assistance to the IRP. The Tribunal fixed a statutory time-frame, directing completion of the CIRP within 180 days from the date of commencement.Mr. Rajesh Chillale appointed as Interim Resolution Professional; moratorium declared; management to cooperate; CIRP to be completed within 180 days.Final Conclusion: The Tribunal admitted the Section 7 petition, initiated CIRP against the Corporate Debtor, appointed an Interim Resolution Professional, declared moratorium, directed cooperation by management and fixed a 180 day period for completion of the CIRP. Issues:Initiation of Corporate Insolvency Resolution Process (CIRP) based on default in payment by the Corporate Debtor to the Financial Creditor.Analysis:The Application filed by the Financial Creditor sought the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to default in payment. The Financial Creditor, a Private Limited Company, alleged that the Corporate Debtor failed to make payments as per the invoices raised, invoking Section 7 of the Insolvency and Bankruptcy Code, 2016 along with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.The Corporate Debtor had availed a loan from a bank, which subsequently turned into a non-performing asset (NPA). The Corporate Debtor approached the Financial Creditor for funds to fulfill the bank's settlement offer. Despite receiving the required loan from the Financial Creditor, the Corporate Debtor expressed difficulty in repaying within the agreed timeframe and requested an extension with increased interest rates, which the Financial Creditor accepted.Moreover, the Corporate Debtor had a history of being admitted to Corporate Insolvency Resolution Process (CIRP) previously, with claims submitted to the Interim Resolution Professional. Subsequently, those orders were set aside by the Hon'ble NCLAT, and a significant amount remained due and payable by the Corporate Debtor, attracting interest.During the hearing, the Corporate Debtor acknowledged the debt but requested 6 to 7 months for repayment, citing financial constraints and debts owed to other creditors. The Tribunal noted the Corporate Debtor's financial difficulties and the inability to propose a payment schedule, leading to the decision to order Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.Consequently, the Tribunal admitted the Company Petition and ordered the commencement of Corporate Insolvency Resolution Process against the Corporate Debtor, appointing an Insolvency Resolution Professional to manage the process. The moratorium was declared, and the Directors, Promoters, and other associated persons were directed to cooperate with the appointed professional for the effective resolution of the insolvency process. The order was communicated to the relevant parties for necessary compliance.