2017 (8) TMI 1543 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - Corporate Debtor - main argument of the Petitioner is that if time be granted then the finances of the Company can be restructured and the Loan can be repaid - HELD THAT - It is justifiable to invoke the provisions of section 10 of The Code. The position of accounts have demonstrated that the Corporate Debtor have committed default in repayment of Debt to the Banks and the private investors. A timely intervention is now required. The Management of the Corporate Debtor having the complete information of the financial affairs of the Corporate Debtor is directed and should cooperate in submitting the total data to IRP without fail because time is the essence in the proceedings to be initiated under IB Code. A Committee of Creditors to be constituted which shall comprise Financial Creditors. The application under section 10 of The Code is hereby Admitted - The Moratorium shall commence henceforth.

Summary

Issues:
1. Invocation of Section 10 of Insolvency and Bankruptcy Code, 2016 by a Corporate Debtor to initiate Corporate Insolvency Resolution Process against itself.
2. Analysis of the financial position of the debtor to determine the feasibility of restructuring and repayment.
3. Decision on admitting the petition and commencing the Corporate Insolvency Resolution Process.
4. Appointment of an Interim Resolution Professional (IRP) and initiation of necessary proceedings.

Issue 1 - Invocation of Section 10 of Insolvency and Bankruptcy Code:
The petition was filed by a Corporate Debtor invoking Section 10 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process against itself. The debtor had availed a credit facility from Bank of Baroda, which was declared a non-performing asset (NPA) leading to recovery proceedings initiated by the bank under the SARFAESI Act, 2002. The debtor argued for restructuring and repayment of the loan if granted time, showcasing its financial position through profit and loss accounts and balance sheets.

Issue 2 - Financial Position Analysis for Restructuring and Repayment:
The tribunal analyzed the financial statements of the debtor, noting the revenue generation, long-term borrowings, inventories, and trade receivables. The debtor's potential for profitability, ongoing business in food products, and assets like factory land and building were considered for restructuring and repayment of the debt. The tribunal found genuine reasons for admission of the petition based on the financial data presented.

Issue 3 - Decision on Admitting the Petition and Commencing Resolution Process:
After detailed examination of the financial accounts and reasons provided by the debtor, the tribunal found it justifiable to invoke Section 10 of the Code. The debtor's default in repayment to banks and private investors necessitated timely intervention. The tribunal directed the management to cooperate in submitting data to the IRP and constituted a Committee of Creditors. The moratorium period under Section 14 was declared to protect the debtor's assets and prohibit legal proceedings during the resolution process.

Issue 4 - Appointment of Interim Resolution Professional and Further Proceedings:
The tribunal approved the appointment of an IRP and directed the professional to follow the Code's procedures diligently. The IRP was tasked with making a public announcement of the Corporate Insolvency Resolution and updating the tribunal on progress within a month. The application under Section 10 was admitted, and the Corporate Insolvency Resolution Process was set in motion from the date of the order.

This detailed analysis of the judgment showcases the tribunal's considerations regarding the debtor's financial position, the necessity of initiating insolvency proceedings, and the procedural steps to be followed moving forward.