2022 (12) TMI 1386 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - It is evident that the debt is due and payable and default has occurred. The present application is complete in terms of Section 7(5) of the Code and is within limitation. The applicant is entitled to claim its dues, establishing the default in payment of the financial debt beyond doubt. In light of the facts and records the present application is admitted and CIRP is ordered to be initiated against corporate debtor. As a consequence of the application being admitted in terms of Section 7(5) of IBC, 2016, moratorium as envisaged under the provisions of Section 14(1) shall follow in relation to the Corporate debtor, prohibiting actions as per clauses (a) to (d) of Section 14(1) of the Code.

Summary

Issues Involved:
1. Validity of the application filed by the applicant.
2. Requirement of a certificate from Information Utility to prove default.
3. Expression of interest from a third party and restructuring application.
4. Admission of the application and initiation of Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Validity of the application filed by the applicant:
The corporate debtor contended that the application was defective as it was filed by a person not holding valid authority. However, the Tribunal found that each page of the application was sealed and signed by a Senior Officer of the bank, who was duly authorized by the delegation of powers annexed to the application. This objection was dismissed as the application was found to be properly authorized.

2. Requirement of a certificate from Information Utility to prove default:
The corporate debtor argued that the application was not maintainable in the absence of a certificate from Information Utility to prove the occurrence of default. The Tribunal referred to orders dated 12.05.2020 and 13.08.2020 issued by the NCLT Principal Bench, which clarified that submission of proof of default from Information Utility is mandatory only for new petitions. Since the present petition was filed on 18.12.2019, the requirement was not applicable. The objection was dismissed.

3. Expression of interest from a third party and restructuring application:
The corporate debtor mentioned receiving an expression of interest from Saanika Industries Private Limited to acquire a controlling equity stake and had moved the lead bank for debt restructuring. However, the Tribunal noted that these contentions were raised to delay the admission of the application. The Tribunal observed that no formal Joint Lenders Meeting (JLM) was conducted, and the last One Time Settlement (OTS) proposal was rejected by the applicant bank. The expression of interest and restructuring application did not absolve the corporate debtor from its liability towards the applicant. The Tribunal rejected the corporate debtor's request to hold the matter for a fresh proposal.

4. Admission of the application and initiation of CIRP:
The Tribunal concluded that the debt was due and payable, and default had occurred. The application was found to be complete in terms of Section 7(5) of the Insolvency and Bankruptcy Code, 2016, and within the limitation period. The applicant established the default in payment of the financial debt beyond doubt. Consequently, the Tribunal admitted the application and ordered the initiation of the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor.

Additional Orders:
- The Tribunal appointed Mr. Kuresh Hatim Khambati as the Interim Resolution Professional (IRP) and directed the Financial Creditor to deposit Rs. 2.00 lacs with the IRP for meeting the expenses of performing his functions.
- The moratorium as envisaged under Section 14(1) of the Insolvency and Bankruptcy Code, 2016, was imposed, prohibiting actions as per clauses (a) to (d) of Section 14(1) of the Code.
- The Tribunal directed that a copy of the order be communicated to the applicant, IRP, and corporate debtor, and forwarded to the Insolvency and Bankruptcy Board of India (IBBI) for updating the Master Data of the corporate debtor in the MCA portal.

Conclusion:
The Tribunal admitted the application filed by the applicant under Section 7 of the Insolvency and Bankruptcy Code, 2016, and ordered the initiation of the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor, appointing Mr. Kuresh Hatim Khambati as the Interim Resolution Professional (IRP).