2017 (6) TMI 410 - Tri - Insolvency and Bankruptcy

Initiation of corporate insolvency resolution process under Sections 10,13 and 14 of the Insolvency and Bankruptcy Code, 2016 - Held that - The instant petition deserves to be admitted. It is, however, observed that the Applicant Company save some sketchy particulars has not given any road map as to how it is going to keep itself afloat as a going concern. However, keeping in perspective the objects for which the Code has been brought into force and to balance the interest of all stakeholders, I am satisfied that the instant application warrants to be admitted to prevent further erosion of capital and to safeguard the assets of the Applicant/Corporate Debtor . (i) Appoint Mr. Krishan Vrind Jain, Mobile No-9417009490 SCO 345-346, 2nd Floor, Sector 35-B, Chandigarh, 160035, e-mail-jainkv@gmailcom, Registration No.IBBI/IPA-001/IP-00619/2016-2017/1396, a Registered Insolvency Professional (IRP) as the Interim Resolution Professional as contemplated under Section 16 of the Code and his term of appointment shall be for a period of thirty days from the date of this order or as may be determined by the Committee of Creditors whichever is earlier; (ii) In terms of Section 17 of the Code , from the date of his appointment, the powers of the Board of Directors shall stand suspended and the management of the affairs shall vest with the Interim Resolution Professional and the officers and the managers of the Corporate Debtor shall report to the Interim Resolution Professional. (iii) The Interim Resolution Professional shall strictly act in accordance with the Code , all the rules framed thereunder by the Board or the Central Government and in accordance with the Code of Conduct governing his profession and as an Insolvency Professional with high standard of ethics and moral. (iv) The Interim Resolution Professional shall endeavour to constitute the Committee of Creditors at the earliest but not laterthan three weeks from the date of this Order. (v) It is hereby directed that the Corporate Debtor , its properties, personnel and persons associated with the management shall extend all cooperation to the Interim Resolution Professional in managing the affairs of the Corporate Debtor as a going concern and extend all cooperation in accessing books and records as well as assets of the Corporate Debtor .

Summary

Issues Involved:
1. Application for initiating corporate insolvency resolution process.
2. Financial status and creditors of the corporate debtor.
3. Appointment of Interim Resolution Professional (IRP).
4. Declaration of moratorium.
5. Duties and powers of the Interim Resolution Professional.

Detailed Analysis:

1. Application for Initiating Corporate Insolvency Resolution Process:
The application was filed by the corporate debtor itself, M/s. Dunn Foods Private Limited, under Sections 10, 13, and 14 of the Insolvency and Bankruptcy Code, 2016. The application was in Form 6 as prescribed by Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The corporate debtor, incorporated on 17.04.2003, sought to initiate the corporate insolvency resolution process (CIRP) due to its financial distress.

2. Financial Status and Creditors of the Corporate Debtor:
The corporate debtor had an authorized share capital of ?50,00,000 and a paid-up capital of ?13,42,00,000. The major shareholders were identified, with Mr. Sunil Guglani holding 54.09%, Mr. Suhail Guglani 21.97%, and Mrs. Suman Guglani 16.39%. The corporate debtor had significant financial liabilities, including debts to Punjab National Bank, Canara Bank, Central Bank of India, and State Bank of India, amounting to ?82.47 crores in default. Additionally, there were operational creditors, including employees, raw material suppliers, and service providers, with a total default amounting to ?95.62 crores, including contingent liabilities.

3. Appointment of Interim Resolution Professional (IRP):
The corporate debtor initially proposed Mr. Prakash Dev Sharma as the IRP, but due to his prior engagement with another company, Mr. Krishan Vrind Jain was subsequently proposed and accepted. Mr. Jain, registered with IBBI under Registration No.IBBI/IPA-001/IP-00619/2016-2017/1396, declared his eligibility and independence from the corporate debtor. The tribunal appointed Mr. Jain as the IRP for a period of thirty days or as determined by the Committee of Creditors, whichever is earlier.

4. Declaration of Moratorium:
A moratorium was declared in relation to several matters as per Section 14 of the Code. This included the institution or continuation of suits or proceedings against the corporate debtor, transferring or disposing of assets, actions to foreclose or enforce security interests, and recovery of property by owners or lessors. The moratorium was effective from the date of the order (02.05.2017) until the completion of the CIRP. Essential goods or services to the corporate debtor were not to be terminated or suspended during the moratorium period.

5. Duties and Powers of the Interim Resolution Professional:
The IRP was vested with the management of the corporate debtor's affairs, with the powers of the Board of Directors suspended. The IRP was directed to exercise all powers and perform duties as per Sections 18 and other relevant provisions of the Code, including taking control and custody of the corporate debtor's assets. The IRP was also instructed to prepare a complete inventory of assets and constitute the Committee of Creditors within three weeks. The IRP was to act in accordance with the Code, rules, and regulations, and maintain high ethical standards. A public announcement of the CIRP initiation was to be made within three days, and a weekly report of events was to be filed with the tribunal.

Conclusion:
The application for initiating the CIRP was admitted, and Mr. Krishan Vrind Jain was appointed as the IRP. A moratorium was declared to protect the corporate debtor's assets and interests of stakeholders, and the IRP was directed to manage the corporate debtor's affairs and report to the tribunal regularly.