Dismissal of Application to Reject Insolvency Petition; Main Petition Admitted; IRP Appointed; Moratorium Declared

The Tribunal dismissed the application seeking rejection of the main Insolvency and Bankruptcy petition, finding it lacked merit. The main petition was admitted as the financial creditor demonstrated the existence of financial debt and default by the Corporate Debtor. An Interim Resolution Professional was appointed, and a moratorium was declared under Section 14 of the Insolvency and Bankruptcy Code. The Tribunal directed the IRP to carry out his duties as per the Code and informed relevant parties of the decision.

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Issues Involved:
1. Application for rejection of the main Insolvency and Bankruptcy (IB) petition.
2. Allegations of fraudulent and malicious invocation of the Insolvency and Bankruptcy Code (IBC).
3. Validity and acknowledgment of financial debt.
4. Appointment of Interim Resolution Professional (IRP).
5. Declaration of moratorium.

Detailed Analysis:

1. Application for rejection of the main IB petition:
The shareholders and a Director of the Corporate Debtor filed IA 3626/ND/2021 under Section 65 of the Insolvency and Bankruptcy Code, 2016, seeking rejection of the main IB petition CP (IB) No. 983 of 2020 filed by the financial creditor. The Tribunal decided to dispose of the main IB petition and the IA by a common order due to their interrelation.

2. Allegations of fraudulent and malicious invocation of the IBC:
The applicants claimed that the financial creditor and its group, who are also shareholders in the Corporate Debtor, breached partnership principles and invoked the provisions of the IBC fraudulently and maliciously. They alleged that the financial creditor created fraudulent documents to initiate false proceedings and filed a police complaint against the financial creditor for fabricating documents.

3. Validity and acknowledgment of financial debt:
The financial creditor provided margin money in the form of Fixed Deposit Receipts (FDRs) to the Corporate Debtor for a project, which was acknowledged in the Corporate Debtor’s balance sheets for the financial years 2012-2013 to 2016-2017. Despite a recall demand notice dated 16.03.2020, the Corporate Debtor failed to repay the loan and interest. The Tribunal found that the financial creditor had invested in a project that the Corporate Debtor failed to complete and changed into another project, justifying the recall of the financial debt.

4. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Ashish Singh as the Interim Resolution Professional (IRP) for the Corporate Debtor, with registration number IBBI/IPA-002/IPN0004167/2017-18/11230. The financial creditor was directed to deposit Rs. 2 Lakhs with the IRP to cover the expenses for performing his functions.

5. Declaration of moratorium:
The Tribunal declared a moratorium in terms of Section 14 of the IBC, imposing prohibitions on the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of any assets, enforcing any security interest, and recovering any property by an owner or lessor. The moratorium does not apply to transactions notified by the Central Government or the supply of essential goods or services to the Corporate Debtor.

Conclusion:
The Tribunal dismissed IA 3626/ND/2021, finding no merit in the application. The main IB petition filed under Section 7 of the IBC was admitted, as the financial creditor proved the existence of financial debt and default by the Corporate Debtor. The Tribunal directed the IRP to perform his functions in accordance with the IBC provisions and communicate the order to relevant parties.

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