2022 (3) TMI 755 - Tri - Insolvency and Bankruptcy

Tribunal Grants Jurisdiction in Company Petition for Insolvency Process

The Tribunal established jurisdiction to hear the Company Petition under section 7 of the Insolvency and Bankruptcy Code, 2016, filed by the Financial ... Debt and default under section 7 - admission of petition under section 7 - Corporate Insolvency Resolution Process - moratorium under section 14 - appointment of Interim Resolution Professional - public announcement of CIRPDebt and default under section 7 - admission of petition under section 7 - The Company Petition under section 7 of the IBC is admissible and is to be admitted as debt and default stand established. - HELD THAT: - The Tribunal found that the Financial Creditor proved the loan agreement, the accrual of interest and payments received, and that the Corporate Debtor had admitted the liability. Applying the principle in Swiss Ribbons that where debt and default are established the Adjudicating Authority is obliged to admit a section 7 petition, the application was held complete and the statutory threshold under section 4(1) was met. No disputed question precluded admission. [Paras 9, 11, 12]Petition under section 7 is admitted and CIRP is initiated against the Corporate Debtor.Corporate Insolvency Resolution Process - moratorium under section 14 - A moratorium under section 14 is to operate from the date of the order until completion of CIRP or further order. - HELD THAT: - On admission of the petition and initiation of CIRP, the Tribunal directed the statutory moratorium to apply, restraining institution or continuation of suits, transfer or disposal of assets, enforcement of security and recovery of property occupied by the Corporate Debtor. Exceptions and continuance of essential supplies as contemplated by the IBC were recorded, and the temporal scope of the moratorium was fixed to the CIRP period or until approval of a resolution plan or liquidation order. [Paras 12]Moratorium under section 14 is declared with the specified scope and duration.Appointment of Interim Resolution Professional - An Interim Resolution Professional (IRP) is appointed to take custody of management and perform CIRP functions. - HELD THAT: - The Financial Creditor proposed a named professional who filed written consent in Form 2 and produced his certificate of registration. The Tribunal appointed the proposed person as IRP, directed that he perform functions under the IBC (including sections 15, 17-21) and that management of the Corporate Debtor vest in the IRP during the CIRP. Officers and managers were directed to furnish documents to the IRP within one week. [Paras 10, 12]The proposed IRP is appointed and vested with management and powers to conduct the CIRP.Public announcement of CIRP - Public announcement of the CIRP is directed to be made immediately in accordance with the IBC and applicable regulations. - HELD THAT: - Following admission, the Tribunal ordered immediate public announcement as specified under section 13 read with the Insolvency Resolution Process Regulations, to invite claims and constitute the process for creditors' participation in the CIRP. [Paras 12]Public announcement of the CIRP shall be made immediately as directed.Expenses for public notice and claims - The Financial Creditor is directed to deposit an amount to meet initial CIRP expenses subject to CoC approval. - HELD THAT: - As part of initiating CIRP, the Tribunal required the Financial Creditor to deposit a specified sum with the IRP to cover costs of issuing public notice and inviting claims; such expenses remain subject to approval by the Committee of Creditors formed during the CIRP. [Paras 12]Financial Creditor shall deposit the directed sum with the IRP to meet initial CIRP expenses, subject to CoC approval.Final Conclusion: The section 7 petition is admitted, CIRP is initiated against the Corporate Debtor; a moratorium under section 14 is declared, public announcement shall be made, the proposed IRP is appointed and vested with management, and the Financial Creditor is directed to deposit funds to meet initial CIRP expenses. Issues:1. Jurisdiction of the Tribunal to hear the Company Petition under section 7 of the Insolvency and Bankruptcy Code, 2016.2. Admissibility of the Company Petition based on debt and default.3. Appointment of Interim Resolution Professional and initiation of Corporate Insolvency Resolution Process (CIRP).4. Moratorium under section 14 of the IBC and its implications.5. Management of the Corporate Debtor during the CIRP period.6. Financial obligations of the Financial Creditor towards the IRP for expenses.7. Communication and compliance requirements post-order issuance.Jurisdiction of the Tribunal:The Tribunal established its jurisdiction to hear the Company Petition under section 7 of the Insolvency and Bankruptcy Code, 2016, filed by the Financial Creditor against the Corporate Debtor. The Corporate Debtor, a Public company, falls within the jurisdiction of the Tribunal as it was incorporated under the Companies Act, 1956, with its registered office in Mumbai.Admissibility of the Company Petition:The Financial Creditor presented evidence of debt and default by the Corporate Debtor, supported by a loan agreement and reminder notices. The Corporate Debtor acknowledged the liability but proposed a payment plan. Relying on the judgment in a relevant case, the Tribunal admitted the Petition as the debt and default were established, ordering the initiation of CIRP against the Corporate Debtor.Appointment of Interim Resolution Professional and CIRP Initiation:The Financial Creditor proposed an Interim Resolution Professional, complying with the necessary rules and regulations. The Tribunal approved the appointment and ordered the initiation of the Corporate Insolvency Resolution Process, entrusting the IRP with the management of the Corporate Debtor during the CIRP period.Moratorium and Implications:A moratorium was declared under section 14 of the IBC, impacting various actions related to the Corporate Debtor's assets and legal proceedings. Essential supplies were protected during this period, with exceptions as notified by the Central Government in consultation with sectoral regulators.Management of Corporate Debtor:During the CIRP period, the management of the Corporate Debtor was vested in the IRP, who was mandated to collect necessary information and documents from the Corporate Debtor's officers and managers promptly.Financial Obligations of the Financial Creditor:The Financial Creditor was directed to deposit a specified sum with the IRP to cover expenses related to public notices and claims, subject to approval by the Committee of Creditors.Communication and Compliance Requirements:The Registry was instructed to communicate the order to relevant parties promptly, and the IRP was directed to update the Registrar of Companies about the appointment. Compliance reports were expected within specific timelines to ensure procedural adherence post-order issuance.