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2020 (10) TMI 538 - Tri - Insolvency and Bankruptcy


Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Allegations of fraudulent and malicious intent under Section 65 of the IBC, 2016.
3. Pre-existing dispute and financial fraud allegations.
4. Admissibility of documents and evidence.
5. Appointment of Interim Resolution Professional (IRP).
6. Declaration of moratorium under Section 14 of the IBC, 2016.

Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Financial Creditor, a bank, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I&B Code-2016) against the Corporate Debtor, M/s. Lakshmi Subbaiaah Tex Private Limited, seeking to initiate the Corporate Insolvency Resolution Process (CIRP). The application included a demand for the declaration of a moratorium and the appointment of an Interim Resolution Professional (IRP). The Financial Creditor claimed a default amount of ?28,43,33,566.87 as of 30.09.2018, with the Corporate Debtor’s account classified as Non-Performing Asset (NPA) on 31.07.2017.

2. Allegations of Fraudulent and Malicious Intent under Section 65 of the IBC, 2016:
The Corporate Debtor objected to the application, arguing it was filed fraudulently and with malicious intent, invoking Section 65 of the IBC, 2016. They claimed the Financial Creditor submitted forged documents and suppressed financial frauds, rendering the application incomplete due to nondisclosure of all information.

3. Pre-existing Dispute and Financial Fraud Allegations:
The Corporate Debtor alleged a pre-existing dispute with the Financial Creditor, citing a subrogation suit in the Madurai District Court and a writ petition in the High Court of Madras. They accused the Financial Creditor of committing corporate fraud in connivance with certain individuals and another bank, which they claimed destroyed the functioning of Lakshmi Subbaiaah Tex Pvt. Ltd.

4. Admissibility of Documents and Evidence:
The Corporate Debtor pointed out specific documents they claimed were suppressed or forged, including the calculation of amounts, certificates of registration of charge, and bank statements. They also highlighted discrepancies in the letter of extension of mortgage and other documents, arguing these issues should lead to the dismissal of the application.

5. Appointment of Interim Resolution Professional (IRP):
The Financial Creditor proposed Mr. Swaminathan Prabhu as the IRP, and the tribunal appointed him to take forward the CIRP process. The IRP was instructed to follow the statutory requirements under Sections 15, 17, and 18 of the I&B Code and file a report within 20 days.

6. Declaration of Moratorium under Section 14 of the IBC, 2016:
Upon admitting the application, the tribunal declared a moratorium under Section 14(1) of the IBC, 2016, which included:
- Suspension of suits or proceedings against the Corporate Debtor.
- Prohibition on transferring or disposing of assets.
- Suspension of actions to enforce security interests.
- Protection of essential goods and services supply during the moratorium.

The moratorium will remain effective until the completion of the CIRP or until an order for liquidation or approval of a resolution plan is passed.

Conclusion:
The tribunal, after considering the facts and circumstances, admitted the application under Section 7 of the IBC, 2016, and initiated the CIRP against the Corporate Debtor. The objections raised by the Corporate Debtor were found to be hypothetical and illusory, lacking concrete evidence. The tribunal concluded that there was a financial debt and default, and the application was complete and within the limitation period. Consequently, a moratorium was declared, and the IRP was appointed to proceed with the CIRP.

 

 

 

 

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