2020 (2) TMI 1448 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - The Respondent not availed the opportunity given by the Adjudicating Authority. Meanwhile the Respondent failed to file statement of objections except stating before the Tribunal on 29.01.2019 by stating they are seriously pursuing the remedy available to get necessary funds to clear the debt, since more than 1200 employees future is at stake . As stated in the memo dated 18.02.2020, the proposal submitted by the Company for restructuring has been already rejected by the Bank vide letter dated 31.08.2019 issued by Petitioner Allahabad Bank. Therefore, the efforts made by the Respondent to resolve the issue failed, resulting the debt in question is established beyond doubt. It is also seen in the financial statement i.e., Balance Sheet and Profit and Loss Account for the year 31.03.2018 that the Companies liabilities, apart from the share capital have increased by almost ₹ 31 crores over 31.03.2017, being ₹ 526.75 crores as on 31.3.2018 as against ₹ 474.93 crores, over 31.03.2017, thus the Company liabilities have been increased over immediately after proceedings here indicating that the Company is losing its ability to repay its debts and hence prima facie indicating its Insolvency. As stated supra, the Bank also offered several opportunities to the Respondent so as to regularize its accounts but it failed to do so and there is no proposal for OTS/settlement of issue is pending with Bank. The debt and default in question as mentioned in the Petition is proved beyond doubt and it was not being controverted by the Respondent. All the pre-requisite conditions as per extant provisions of Code and the law stand fulfilled in the instant case. The instant Company Petition/Application is filed in accordance with extant provisions of Code and the Rules made thereunder, a qualified Insolvency Professional namely Shri Ramanahalli Shivanna DoddaByregowda, is proposed to appoint him as Interim Resolution Professional, who has filed Written Communication and affidavit dated 04.09.2019, in a prescribed forum, who is prima facie eligible to be appointed and the default in question as admittedly occurred. Hence, it is a fit case for admission to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, appointing IRP, Moratorium etc., as per the Code. Application admitted - moratorium declared.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Existence of debt and default
3. Appointment of Interim Resolution Professional (IRP)
4. Moratorium declaration
5. Impact on employees and company operations
6. Pending related cases

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petition was filed by M/s. Allahabad Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate CIRP against M/s. Southern Batteries Private Limited due to a default amounting to ?141,01,20,530. The petition included a detailed list of financial facilities availed by the Corporate Debtor, sanctioned from 2008 to 2017, and the corresponding defaults.

2. Existence of Debt and Default:
The Financial Creditor provided evidence of the Corporate Debtor's default, including the classification of the loan account as NPA on 25.11.2018 and subsequent recall of the loan. Recovery proceedings were initiated under the SARFAESI Act and before the DRT, Bangalore. The Corporate Debtor acknowledged the debt in its financial statements and balance sheets for 2016, 2017, and 2018, and proposed several resolution plans which were not adhered to.

3. Appointment of Interim Resolution Professional (IRP):
The Petitioner proposed Shri Ramanahalli Shivanna DoddaByregowda as the IRP, who filed a written communication and affidavit declaring his qualifications and absence of disciplinary proceedings. The Tribunal found the application to be in accordance with the law and admitted the petition, appointing the proposed IRP.

4. Moratorium Declaration:
Upon admission of the petition, a moratorium was declared prohibiting:
a. Institution or continuation of suits or proceedings against the corporate debtor.
b. Transfer or disposal of assets by the corporate debtor.
c. Foreclosure or enforcement of security interests.
d. Recovery of property occupied by the corporate debtor.
e. Termination or suspension of essential goods or services.

The moratorium is effective from the date of the order until the completion of the CIRP.

5. Impact on Employees and Company Operations:
The Tribunal addressed concerns about the impact on the company's 1200 employees, emphasizing that initiating CIRP does not equate to closing the company's operations. Instead, it aims to find a resolution to revive the company while keeping it as a going concern. The Tribunal noted that parties could file an appropriate application to conclude CIRP if a settlement is reached.

6. Pending Related Cases:
The Tribunal acknowledged five other cases seeking CIRP against the same Corporate Debtor. These cases were disposed of separately, allowing the petitioners to make claims before the appointed IRP.

Conclusion:
The Tribunal admitted the petition, initiating CIRP against M/s. Southern Batteries Private Limited, appointing Shri Ramanahalli Shivanna Shivanna DoddaByregowda as the IRP, and declaring a moratorium. The decision ensures compliance with the Insolvency and Bankruptcy Code, 2016, and aims to resolve the company's financial distress while safeguarding the interests of employees and creditors.