2017 (6) TMI 1191 - Tri - Companies Law

Initiation of Insolvency Resolution Process - Held that - The apprehension, or rather certainty, of taking away the physical possession of their valuable properties and being dispossessed appears to be the motivation for the Corporate Debtor to approach this Tribunal under the Code, rather than ensuring Resolution of their debts or seeking a turnaround of the Corporate business. There is no explanation as to why the FDRs have not been liquidated to reduce the liability towards the Banks. To stay the repossession of immovable properties by Banks by resorting to the provision of Sec. 10 of the Code would clearly be an abuse of the process of law to which this Bench certainly cannot be a party to. It is not sufficient just to meet the requirements under sec. 10 of the Code which would automatically entitle the Corporate Debtor to initiate such proceedings. The Adjudicating Authority has to consider the merits of each case and see beyond what meets the eye, and only after due application of mind, consider the case on its merits. This Bench does not deem it just, fit and proper to admit the petition as initiation of the proceedings by the Corporate Debtor shall cause irreparable loss and injury to the Consortium of Banks, and an uncalled for protection to the borrowers and various guarantors.

Summary

Issues:
1. Invocation of Section 10 of the Insolvency and Bankruptcy Code by the Corporate Debtor.
2. Details of outstanding liabilities towards Financial Creditors and Operational Creditors.
3. Appointment of Interim Resolution Professional.
4. Securities offered by the Corporate Debtor.
5. Concerns regarding abuse of the insolvency process.

Analysis:
1. The judgment deals with a petition filed by the Corporate Debtor under Section 10 of the Insolvency and Bankruptcy Code due to its inability to liquidate outstanding liabilities towards Financial Creditors and Operational Creditors. The petition seeks initiation of the insolvency resolution process to address the financial distress faced by the Corporate Debtor.

2. The petition includes details of the total debt owed to Financial and Operational Creditors, amounting to over ?513 crores. The Corporate Debtor has offered immovable properties, fixed deposits, and personal guarantees of directors as securities. The petition also highlights the extensive efforts made by the Joint Lenders Forum to recover the outstanding amounts.

3. The Corporate Debtor proposed the appointment of an Interim Resolution Professional, Mr. Ram Ratan Kanoongo, who provided his consent and Certificate of Eligibility. The petition asserts that the Corporate Debtor is not disqualified under Section 11 of the Code for invoking the resolution process.

4. The Corporate Debtor offered various immovable properties and fixed deposits as securities to the Banks forming the Joint Forum of Financial Creditors. The list of guarantors and the corresponding securities provided are detailed in the judgment, showcasing the extensive collateral offered by the Corporate Debtor.

5. The judgment raises concerns about the Corporate Debtor potentially abusing the insolvency process to avoid repossession of properties by Banks. The Bench emphasizes the need for the Adjudicating Authority to thoroughly assess each case beyond the surface details to prevent misuse of insolvency proceedings. Ultimately, the Bench dismisses the petition, citing potential irreparable loss to the Consortium of Banks and unwarranted protection to borrowers and guarantors.