2018 (3) TMI 1913 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial debt - non-performing asset - Corporate Applicant has filed the application - HELD THAT - The I and B Code 2016 was enacted to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons that too in a time bound manner for maximization of value of assets of a corporate debtor. The purpose of CIRP is to promote entrepreneurship side by side to balance the interest of all stakeholders. A petition either filed under section 7 under section 9 or under section 10 is to be admitted to achieve the said goal also to consider the objectives enshrined in the Preamble and the purpose for which this Code came into operation - The hon ble court has not directed the respondent restraining to take due recourse provided under any provision of law so that the liability of the petitioner GTL be secured if possible along with other stakeholders. Any judicial authority shall encourage such move on the part of the debtor. Filing of the petition under section 10 is a step towards the said direction. As far as the corporate debtor s filing of this petition is concerned this is not a case that the fact about the order of the hon ble Delhi Court was concealed. Considering the voluminous evidences in 8 Volumes annexed along with the application and in the light of the provisions of section 10 of the Code I hereby hold that the conditions as prescribed under section 10 of the Code have duly been fulfilled. Since this is a petition of the corporate debtor therefore the insolvency process shall commence as prescribed under section 10 of the IBC 2016. On one hand the existence of financial debt as well as operational debt is proved on the other hand the occurrence of default is also established. The corporate debtor had failed to pay the amounts due and also failed to adhere to or comply with the other terms of facility agreements. The financial debts have been classified as non-performing asset in the books of the financial creditor. The petition under consideration therefore deserves admission . Petition admitted - moratorium declared.

Issues Involved:
1. Application for initiation of Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency and Bankruptcy Code, 2016.
2. Objection by an operational creditor (intervener) regarding the application.
3. Freezing of the corporate debtor's bank accounts and its impact.
4. Urgency due to potential suspension of telecom license.
5. Evaluation of financial debt, operational debt, and default.
6. Appointment of Interim Resolution Professional (IRP).
7. Commencement of moratorium.

Issue-wise Detailed Analysis:

1. Application for initiation of CIRP:
The application was filed by the corporate debtor under Section 10 of the Insolvency and Bankruptcy Code, 2016, seeking to declare itself insolvent. The application was necessitated by the February 12, 2018, RBI guidelines aimed at resolving stressed assets, which replaced existing frameworks with a harmonized and simplified generic framework. The petitioner argued that the conditions required for admission under Section 10 were minimal, needing only to establish the existence of debt and default.

2. Objection by an operational creditor:
An intervener representing an operational creditor, GTL Infrastructure Ltd., objected to the application, citing a Delhi High Court order restraining Aircel Ltd. from disposing of assets or creating third-party interests. The intervener argued that the application under Section 10 was malicious and defective due to non-disclosure of material facts. However, the tribunal found that the application was not in contradiction to the High Court's order and that the filing was a step towards restructuring the debtor's finances.

3. Freezing of bank accounts:
The corporate debtor's bank accounts were frozen, including a TRA account with substantial deposits, preventing the company from operating its business and paying salaries. The tribunal noted the urgency to avoid a law and order situation and to allow the company to run its business under the supervision of an insolvency resolution professional.

4. Urgency due to potential suspension of telecom license:
The tribunal acknowledged the apprehension that the Department of Telecommunications (DoPT) might suspend the telecom license due to the company's stressed financial position. The tribunal emphasized the need for a resolution plan to address these issues.

5. Evaluation of financial debt, operational debt, and default:
The tribunal reviewed the voluminous evidence, including details of financial and operational creditors, and found that the conditions for admission under Section 10 were met. The existence of financial and operational debt, along with the occurrence of default, was established. The corporate debtor had failed to pay amounts due and comply with facility agreements, leading to the classification of debts as non-performing assets.

6. Appointment of Interim Resolution Professional (IRP):
The tribunal appointed Mr. Vijaykumar V. Iyer as the IRP to oversee the insolvency process. The IRP was tasked with performing duties under Sections 18 and 15 of the Insolvency and Bankruptcy Code, and to submit a progress report within 30 days.

7. Commencement of moratorium:
The tribunal admitted the petition and commenced the moratorium as prescribed under Section 14 of the Insolvency and Bankruptcy Code. The moratorium prohibits the institution or continuation of suits, transferring or disposing of assets, and recovery actions against the corporate debtor. Essential goods and services to the corporate debtor must continue without interruption during the moratorium period.

Conclusion:
Considering the evidence and the provisions of Section 10, the tribunal held that the conditions for admission were fulfilled, and the corporate insolvency resolution process was commenced. The tribunal directed the promoters and directors not to leave the country without permission and provided GTL Infrastructure Ltd. the liberty to lodge claims before the IRP. The tribunal emphasized the need for a resolution plan to address the financial distress and revive the company's operations.

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