2022 (2) TMI 462 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Process Initiated: Key Points and Appointment of Interim Resolution Professional

Bank of India Versus Vikas WSP Limited

The court admitted the petition for initiation of Corporate Insolvency Resolution Process (CIRP) against the corporate debtor due to default in payments. ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Time limitation - HELD THAT:- In the present case, the occurrence of default of debt is evidenced by the copy of the agreement of term loan, General Power of Attorney, letter of undertaking cum declaration, common deed of hypothecation and sanction letter dated 24.10.2011. The corporate debtor has defaulted in making the regular payments of the credit facilities sanctioned by the petitioner and a demand notice under Section 13(2) of the Sarfaesi Act, 2002 recalling debt. Whether the present application is filed within limitation? - HELD THAT:- The corporate debtor has acknowledged the debt by offering one-time settlement vide its letter dated 20.02.2019 and the present petition has been filed on 13.05.2019. Therefore, the petition has been filed within the period of limitation. Moreover, the Corporate Debtor has also admitted the liability but stated that it has been experiencing financial crises and unable to make payment to the petitioner. The application filed in the prescribed Form No. 1 is found to be complete - the present petition being complete and having established the default in payment of the Financial Debt for the default amount being above the threshold limit, the petition is admitted in terms of Section 7(5) of the IBC and accordingly, moratorium is declared in terms of Section 14 of the Code. Application allowed. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Evidence of default by the Corporate Debtor.3. Timeliness of the application within the limitation period.4. Completeness of the application in prescribed Form No. 1.5. Declaration of moratorium under Section 14 of the IBC.6. Appointment of Interim Resolution Professional (IRP) and related directives.Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016:The petition was filed by the Bank of India through its Authorized Representative to initiate CIRP against M/s. Vikas WSP Limited. The petition was supported by an authorization letter and power of attorney.2. Evidence of Default by the Corporate Debtor:The corporate debtor requested the petitioner to avail/enhance credit facilities, leading to the execution of several documents including Form 8 for creation and modification of charges, sanction letters, and hypothecation deeds. The debtor defaulted in regular payments, evidenced by a demand notice under Section 13(2) of the SARFAESI Act, 2002, and the recall letter dated 15.12.2017.3. Timeliness of the Application within the Limitation Period:The corporate debtor acknowledged the debt via a one-time settlement offer on 20.02.2019. The petition was filed on 13.05.2019, thus within the limitation period. The debtor admitted liability but cited financial crises and inability to make payments.4. Completeness of the Application in Prescribed Form No. 1:The application was found complete, with the proposed Interim Resolution Professional (IRP) having no disciplinary proceedings against him. The total amount of default was Rs. 90,09,15,442.30 as of 16.05.2019.5. Declaration of Moratorium under Section 14 of the IBC:The tribunal declared a moratorium, prohibiting:- Institution or continuation of suits or proceedings against the corporate debtor.- Transfer, encumbrance, or disposal of the debtor’s assets.- Actions to foreclose, recover, or enforce any security interest.- Recovery of property occupied by the debtor.- Termination or suspension of essential goods or services to the debtor.The moratorium will remain effective until the completion of the CIRP or approval of a resolution plan or liquidation order.6. Appointment of Interim Resolution Professional (IRP) and Related Directives:Mr. Darshan Singh Anand was appointed as the IRP. He is directed to:- Take steps mandated under Sections 15, 17, 18, 20, and 21 of the IBC.- Collate claims, determine the financial position, and constitute a Committee of Creditors (CoC).- File a report certifying the constitution of the CoC within thirty days and convene the first meeting within seven days of filing the report.- Send regular progress reports to the tribunal every fortnight.The petitioner is directed to deposit Rs. 2,00,000 with the IRP for immediate CIRP expenses, to be reimbursed by the CoC. The order is to be communicated to both parties and the IRP.Conclusion:The petition was admitted, establishing default in payment of financial debt above the threshold limit. The tribunal declared a moratorium and appointed an IRP with specific directives to proceed with the CIRP.