Tribunal Admits Insolvency Application, Declares Moratorium and Appoints Resolution Professional

The tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, declaring a moratorium and appointing an Interim Resolution Professional. The delay in filing the counter was condoned, and the Corporate Debtor's account was classified as fraudulent, impacting its ability to propose a settlement. The tribunal emphasized the limited role in assessing defaults and proceeded with the Corporate Insolvency Resolution Process, directing compliance with the IBC, 2016. An upcoming hearing was scheduled for further proceedings.

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Issues Involved:
1. Condonation of delay in filing the counter.
2. Admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
3. Declaration of moratorium and appointment of Interim Resolution Professional (IRP).
4. Classification of the Corporate Debtor's account as fraudulent.
5. Initiation of Corporate Insolvency Resolution Process (CIRP).

Detailed Analysis:

1. Condonation of Delay in Filing the Counter:
IA/1186(CHE)/2021 was filed by the Respondent seeking a condonation of delay of 14 days in filing the counter. The tribunal condoned the delay and took the counter on record, thereby allowing IA/1186(CHE)/2021.

2. Admission of the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The application CP(IB)/203(CHE)/2021 was filed by the Financial Creditor, Indian Overseas Bank, under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor, Rosvar Steels Private Limited. The tribunal noted that the Financial Creditor is a bank and provided the registered office address. The Corporate Debtor is a private limited company incorporated on 29.06.1995. The Financial Creditor proposed the name of Mrs. M. Jayasree as the Interim Resolution Professional (IRP).

3. Declaration of Moratorium and Appointment of Interim Resolution Professional (IRP):
The tribunal found that the Financial Creditor claimed a sum of Rs. 31,17,20,210.16 as on 19.08.2021, with the date of default mentioned as 31.10.2018. The tribunal, after hearing submissions from both parties, concluded that the debt and default had been proven beyond reasonable doubt. Consequently, the tribunal initiated the Corporate Insolvency Resolution Process (CIRP) and declared a moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016. The IRP, Mrs. M. Jayasree, was directed to take charge of the Corporate Debtor's management immediately and to make a public announcement within three days.

4. Classification of the Corporate Debtor's Account as Fraudulent:
The Corporate Debtor argued that its account was classified as fraudulent by the Financial Creditor, leading to an FIR by the CBI. The Corporate Debtor contended that no diversion of funds or fraudulent acts had been identified by the CBI. The Respondent had filed a writ petition for the removal of the fraudulent classification. Despite these arguments, the tribunal noted that the classification as fraudulent hindered the Corporate Debtor's ability to propose a One Time Settlement (OTS).

5. Initiation of Corporate Insolvency Resolution Process (CIRP):
The tribunal referred to the Supreme Court case of Innoventive Industries Limited v. ICICI Bank Limited, emphasizing that the adjudicating authority's role under Section 7 of the IBC is limited to assessing whether a default has occurred based on the records provided by the financial creditor. The tribunal found that the financial debt and default were proven and thus proceeded with the CIRP. The moratorium was declared, and the IRP was directed to comply with the relevant sections of the IBC, 2016. The IRP was also instructed to file the first progress report before the tribunal on or before the 45th day of the initiation of CIRP.

Conclusion:
The application was admitted under Section 7 of the IBC, 2016, and the moratorium was declared. The IRP was appointed, and the tribunal directed the IRP to take necessary steps as per the IBC, 2016. The tribunal also scheduled a subsequent hearing for 04.08.2022.

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