2019 (11) TMI 1729 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of self-proclamation insolvency resolution - corporate person defaulted in paying the debt of two financial creditors - existence of debt and dispute or not - HELD THAT - In this case, it is found from the material on record that the Corporate Debtor committed default in paying the debt more than Rs. 1,00,000/- of some of the creditors. Out of two, one financial creditor earlier Standard Chartered Bank and now M/S. CFM Asset Reconstruction Pvt. Ltd.(Assignee) Assignment agreement dated 24th July, 2019 has no objection to admit the corporate person in CIRP. Another financial creditor, namely, Centrum Financial Services Limited objected on the ground that they are secured creditors. It is made clear that Financial Creditor, namely, Centrum Financial Services Limited can raise its contention before the RP at proper stage. Application cannot be rejected on this ground. It is found that almost all directors and almost all shareholders attended the said meeting and they have passed special resolution. Section 103(1)(A) of the Companies Act 2013 requires that if the total member of the company does not exceed 100 then five members personally present in such meeting shall form the Coram if it is a public company. In this case, admittedly Sri Aranath Logistics Limited does not have 100 members. Hence, required Coram has passed to special resolution. In our considered opinion the special resolution to start self-proclamation CIRP cannot be said to be invalid. It is found that the corporate person successfully demonstrated before this Authority that is has committed default in paying the debt more than Rs. 1 Lakh. Thus the corporate person is eligible to start self-proclamation CIRP. No disciplinary proceeding is pending against the IRP. Special resolution produced on record appears to be proper and correct. Application admitted - moratorium declared.

Summary

Issues:
- Application under Section 10 of Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process (CIRP) due to default in debt payment.
- Validity of the special resolution passed by the shareholders of the corporate person.
- Objections raised by financial creditors and shareholders regarding the application for CIRP.
- Appointment of Interim Resolution Professional (IRP) and declaration of moratorium.

Analysis:
1. Default in Debt Payment and Application for CIRP:
- The corporate person, M/S. Sri Aranath Logistics Ltd., filed an application under Section 10 of the Insolvency and Bankruptcy Code, 2016, citing a default in debt payment to two financial creditors totaling Rs. 111,99,32,000.
- The application included necessary information as per Section 10 requirements, such as details of books of account and proposed IRP.

2. Validity of Special Resolution:
- The corporate person complied with all provisions of Section 10 of the IBC, 2016, including passing a special resolution by shareholders in an Extraordinary General Meeting.
- Objections were raised by financial creditors and shareholders regarding the genuineness of the special resolution and the status of secured creditors, but the objections were not deemed sufficient to reject the application.

3. Appointment of IRP and Moratorium:
- The Tribunal admitted the application for CIRP, declared a moratorium, and appointed Mr. Hanumal Mal Choraria as the Interim Resolution Professional.
- The moratorium prohibits various actions against the corporate debtor, and essential goods or services supply cannot be terminated during this period.
- The IRP is directed to convene a Committee of Creditors for a resolution plan and conduct the CIRP in a time-bound manner.

4. Judgment and Directions:
- The Tribunal found the corporate person eligible to start the CIRP, as it demonstrated default in debt payment and fulfilled necessary requirements.
- The special resolution was considered valid, and objections raised by financial creditors and shareholders were dismissed.
- The order included directions for the IRP, payment of fees, communication of the order to relevant parties, and scheduling a progress report filing.

In conclusion, the Tribunal admitted the application for CIRP, appointed an IRP, declared a moratorium, and provided detailed directions for the resolution process, emphasizing compliance with legal regulations and procedural requirements.