2017 (6) TMI 1166 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - the financial creditor has not named any proposed insolvency resolution professional - Held that - On reading of the above 2 sub-sections, it is apparent that while there is a provision for the Adjudicating Authority to make a reference to the Board for a recommendation of an Insolvency professional, in the case of an operational creditor, there is no such provision in the case of a financial creditor. The instant application has been filed under section 7 of IBC as a financial creditor. The applicant financial creditor has not proposed the name of any insolvency professional and thus, has not fulfilled the requirement as in sub-section 3(b) of section 7 of the Code. Hence, we are unable to admit the application for insolvency as the same is not complete.

Summary

Issues:
1. Petition under section 7 of Insolvency and Bankruptcy Code for Corporate Insolvency Resolution Process initiation.
2. Default in repayment by the corporate debtor.
3. Opposition by the corporate debtor regarding outstanding debt.
4. Lack of proposed insolvency resolution professional by the financial creditor.

Analysis:
1. The petition was filed by a financial creditor seeking initiation of Corporate Insolvency Resolution Process against the corporate debtor for defaulting on a loan. The creditor provided details of the loan amount, repayment requests, and collateral offered. Despite multiple notices and a legal notice, the debt remained unpaid, leading to the insolvency petition. However, the previous insolvency petition was rejected due to the absence of a nominated insolvency professional, which was not rectified in the present application.

2. The corporate debtor opposed the petition, claiming that the financial creditor owed them a significant sum. They presented evidence of property transactions between the parties, asserting that the outstanding amount was due from the creditor. The Tribunal examined the documents provided by the debtor and concluded that there was no contractual relationship regarding the property transactions that could offset the debt owed by the corporate debtor to the financial creditor.

3. The Tribunal highlighted the requirement for a proposed insolvency resolution professional in applications made by financial creditors under the Insolvency and Bankruptcy Code. The law mandates the submission of the proposed professional's name along with the application. Since the financial creditor failed to nominate an insolvency professional, the application was deemed incomplete and could not be admitted for insolvency proceedings.

4. The judgment emphasized the specific provisions of the Code regarding the appointment of an interim resolution professional in cases of financial creditors. It noted the absence of a proposed professional in the application, which was a prerequisite for initiating insolvency proceedings. Due to this non-compliance with the statutory requirement, the Tribunal dismissed the application, stating it was incomplete and could not proceed without a nominated insolvency professional.