Tribunal Admits Financial Creditor's Insolvency Application against S.D. Pharmacy: Moratorium, IP Appointment

The Tribunal admitted the Financial Creditor's application for initiating Corporate Insolvency Resolution Process under Section 7 of the I&B Code, 2016 against the Corporate Debtor, M/s. S.D. Pharmacy P. Ltd. The Tribunal imposed a moratorium under Section 14 of the I&B Code, 2016, appointed an Insolvency Professional, and mandated the continuation of essential goods or services supply to the Corporate Debtor. The Financial Creditor was directed to deposit a certain amount to initiate proceedings, and the management of the Corporate Debtor now rests with the Interim Resolution Professional. The Tribunal's judgment outlined necessary steps for the effective resolution process.

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Issues:
Initiation of Corporate Insolvency Resolution Process under Section 7 of I&B Code, 2016 by Financial Creditor against Corporate Debtor M/s. S.D. Pharmacy P. Ltd.

Analysis:
The Financial Creditor, Dhanlaxmi Bank Ltd., filed CP (IB)/34/KOB/2021 under Section 7 of the I&B Code, 2016 against the Corporate Debtor, M/s. S.D. Pharmacy P. Ltd., citing default in repayment of credit facilities. The Corporate Debtor's account was classified as a Non-Performing Asset (NPA) on 30.04.2019, with an outstanding amount of &8377; 1,08,58,311.16, including principal and interest. The Corporate Debtor, engaged in manufacturing and distribution of Ayurvedic Medicines, was granted a cash credit facility of &8377; 80,00,000, secured by land, factory, and other assets. Despite multiple notices and opportunities, the Corporate Debtor failed to repay the dues, leading to the Financial Creditor initiating proceedings under the SARFAESI Act, 2002.

The Financial Creditor's application was filed on 19.10.2021, and after several adjournments due to non-appearance of the Corporate Debtor, the Tribunal proceeded ex-parte on 08.03.2022. Relying on relevant sections of the I&B Code, the Tribunal found the application admissible, meeting the minimum requirement of &8377; 1 Crore for insolvency filing. The Tribunal also approved the appointment of an Insolvency Professional, Shri. Jasin Jose, with no pending disciplinary proceedings, to oversee the Corporate Insolvency Resolution Process (CIRP).

The Tribunal issued an order admitting the application, imposing a moratorium under Section 14 of the I&B Code, 2016, preventing legal actions against the Corporate Debtor's assets during the CIRP. Essential goods or services supply to the Corporate Debtor should continue during the moratorium. The order of moratorium remains effective until the completion of CIRP or liquidation approval. The public announcement of CIRP and appointment of the Interim Resolution Professional were also mandated by the Tribunal.

The Financial Creditor was directed to deposit &8377; 2,00,000 with the Interim Resolution Professional to initiate proceedings. The management of the Corporate Debtor now vests in the IRP, with obligations for officers and managers to cooperate. The Registry was instructed to communicate the order promptly to all relevant parties.

In conclusion, the Tribunal's detailed judgment admitted the application for initiating CIRP against the Corporate Debtor, setting forth necessary steps and safeguards in line with the I&B Code, 2016, to facilitate the resolution process effectively.

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