2019 (10) TMI 1530 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - Under sub-section 5(a) of section 7 of the code, the application filed by the petitioner financial creditor has to be admitted on satisfaction that (i) Default has occurred; (ii) Application is complete, and (iii) No disciplinary proceeding against the proposed IRP is pending. In view of the above no doubt is left that there was an advancement of loan and default on part of the respondent- corporate debtor is established. Even Otherwise there is overwhelming documentary evidence on record which support those findings - After a conjoint reading of the aforesaid provision along with Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, as already recorded that a default has occurred and the application under sub section 2 of Section 7 is complete. The IRP proposed does not have any disciplinary proceedings pending against him. This petition is admitted and Mr. Sameer Rastogi is appointed as the Interim Resolution Professional - Moratorium declared.

Summary

Issues Involved:
1. Triggering of Corporate Insolvency Resolution Process (CIRP)
2. Compliance with procedural requirements under the Insolvency and Bankruptcy Code (IBC)
3. Determination of default by the Corporate Debtor
4. Appointment of Interim Resolution Professional (IRP)
5. Declaration of moratorium
6. Conduct of the Corporate Debtor during proceedings
7. Directions to Financial Creditor and Ex-Management

Detailed Analysis:

1. Triggering of Corporate Insolvency Resolution Process (CIRP):
The Financial Creditor, Small Industries Development Bank of India (SIDBI), filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process against M/s Radhey Sham Tandon Manufacturing Private Limited (Corporate Debtor). The petition aimed to address the default in repayment of financial debt.

2. Compliance with procedural requirements under the Insolvency and Bankruptcy Code (IBC):
The petition was found to be complete in all respects as prescribed by Rule 4 (1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, read with Section 7 (2) of IBC. The Financial Creditor provided all necessary documents, including a written communication from the proposed Resolution Professional, Mr. Sameer Rastogi, and certificates under Section 2A(n) of the Bankers’ Book Evidence Act.

3. Determination of default by the Corporate Debtor:
The Corporate Debtor's account was classified as Non-Performing Asset (NPA) on 08.06.2016. The total amount claimed to be in default was Rs. 7,91,84,152.00. The Financial Creditor issued a notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, due to repeated defaults by the Corporate Debtor. The Corporate Debtor acknowledged the borrowed amounts in its balance sheet, and a record of default was available with CIBIL.

4. Appointment of Interim Resolution Professional (IRP):
Mr. Sameer Rastogi was proposed as the Interim Resolution Professional, and his appointment was confirmed as there were no disciplinary proceedings pending against him. The Tribunal directed the Financial Creditor to deposit Rs. 2 lacs with the IRP to cover the expenses of performing his duties.

5. Declaration of moratorium:
A moratorium was declared in terms of Section 14 of the Code, prohibiting the initiation or continuation of legal proceedings against the Corporate Debtor. The supply of essential goods or services, such as water and electricity, was not to be terminated during the moratorium period.

6. Conduct of the Corporate Debtor during proceedings:
The Corporate Debtor exhibited delaying tactics by repeatedly seeking time to file a reply and failing to comply with the Tribunal's orders. Despite being granted multiple opportunities, the Corporate Debtor did not file a reply or pay the imposed cost. Consequently, the Tribunal proceeded ex parte.

7. Directions to Financial Creditor and Ex-Management:
The Tribunal directed the Financial Creditor to deposit funds with the IRP and instructed the Ex-Management/Auditors to provide all necessary documents and information to the IRP within a week. The Tribunal also addressed a complaint regarding discrepancies in the statement of account, suggesting that the IRP could seek corrections if necessary.

Conclusion:
The petition to initiate the Corporate Insolvency Resolution Process was admitted, and Mr. Sameer Rastogi was appointed as the Interim Resolution Professional. A moratorium was declared, and directions were issued to ensure the smooth conduct of the insolvency process. The Tribunal highlighted the obstructive behavior of the Corporate Debtor and emphasized the need for compliance with procedural requirements.