TaxTMI 
TaxTMI 
2020 (10) TMI 271
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....ion 60(5) of the Insolvency and Bankruptcy Code, 2016 (in short IB Code, 2016) read with rule 11, 13 & 32 of the National Company Law Tribunal (Adjudicating Authority) Rules, 2016, inter-alia seeking to direct the RP to restore the original situation where unit I & II are financed by the Applicant herein and the same being repaid due to the availability of the Funds and those units not being under cash crunch continued to be repaid as repayment does not amount to "Recovery". 2. The brief facts of the case are as follows: a) That this Adjudicating Authority admitted the Company Application filed under section 7 of the IB Code, 2016 vide its order dated 05.09.2019 in CP (IB) No. 420/7/HDB/2018 for initiating the Corporate Insolven....
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.....2019, the members of CoC requested the R2 herein to continue servicing interest and principal payment to Unit I and II lenders even after the commencement of CIRP of the Corporate Debtor. However, the same was denied by the R2, since the cash flows of the Operational Units in the above stated three phases in project plant were preliminary charged/secured to the few Financial Creditors of the Corporate Debtor including this Applicant. e) That R2 herein, Resolution Professional contented that the Corporate Debtor is under moratorium and all the payments on account of interest or debt repayment are on hold. He further stated with regard to the interest servicing to Unit I & II lenders that it is not sustainable as any disbursements o....
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....cy and Bankruptcy Code, 2016. i) That the Resolution Professional (R2 herein) has totally misunderstood the difference between the terms 'Repayment' and 'Recovery' under the provisions of moratorium and instead had expanded and merged the term "recovery" into the term "repayment" of an existing debt. In the current matter there are units which are feasible and there are units which are not feasible. The Units I & II of the Corporate Debtor are under the operation and there is cash flow enabling the unit to service the debt or enables them to repay. j) That the Resolution Professional, R2 herein is showing up the revenues of the Unit I & II into fixed deposit which is up the tune of Rs. 100 Crores with the s....
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....e Corporate Debtor, nor it can appropriate any amount towards its own dues. c. That the Applicant herein is not entitled to any payment towards the satisfaction of its debt during the period of moratorium. As such, the Application filed by the Applicant deserves to be dismissed for this reason alone since such payment would be in contravention of the moratorium imposed under the admission order. d. That if the RP/R2 herein is directed to make any payments as been sought by the Applicant, the same would amount to preferential treatment in favour of the applicant, at the prejudice of the remaining creditors of the Corporate Debtor. Such preferential treatment is squarely prohibited under the IB Code, 2016. e. That t....
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....ion. 4. Heard both the sides and perused the records. 5. The main question to be decided in this application can be framed as under: "Whether it is permissible under the provisions of IBC for the Corporate Debtor to repay the debts of one of the many financial creditors in preference to other financial creditors after initiation of CIRP and invocation of moratorium u/s 14 of the Code? 6. The objectives of the Code are enshrined in its preamble which incorporates maximisation of value of the assets of the Corporate Debtor and balancing the interests of all stakeholders as two of its avowed objectives. 7. As soon as the CIRP is initiated, the Corporate Debtor is subjected to a Moratorium U/s 14 whereby the following actio....
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....during moratorium period." 8. The main reason to prohibit the aforesaid action is to provide for a calm period to the Corporate Debtor during which a resolution can be arrived at. Such calm period ensures keeping the corporate debtor's assets together during the insolvency resolution process so that the corporate debtor may continue as a going concern while the creditors take a view on the resolution of default and cannot resort to individual enforcement action which may frustrate the objectives of the CIRP and the Code. 9. It is pertinent to emphasize here that Clause (b) of Section 14(1) clearly and categorically prohibits any transfer or alienation of assets, legal rights or beneficial interest therein by the Corporate Debtor t....