2017 (7) TMI 925 - Tri - Insolvency and Bankruptcy

Initiating corporate insolvency resolution process - Insolvency and Bankruptcy Code, 2016 - Held that - The figures extracted indicate the losses with continued fall in revenue, therefore, it seems that the applicant has fallen into debt trap and is competent to set in motion the insolvency resolution process as contemplated under the Code . On the basis of the aforesaid statements of the affairs of the company, the outstanding amount as per the books of the company towards financial creditors is ₹ 206.45 crores and the amount in default towards financial creditors is ₹ 206.64 crores. It is represented that the total amount of operational creditors (Raw Material Suppliers) is ₹ 9.25 crores and the amount in default is ₹ 9.25 crores. The total amount of operational creditors (Government dues) is ₹ 0.55 crores and the amount in default is ₹ 14.53 crores. The total amount of operational creditors (Workers/Employees) is ₹ 0.22 crores and the amount in default is nil. The total amount of operational creditors (Service providers) is ₹ 0.32 crores and the amount in default is ₹ 0.04 crores. In view of the aforesaid discussion, the instant petition deserves to be admitted. It is, however, observed that the applicant company save some sketchy particulars has not given any roadmap as to how it is going to keep itself afloat as a going concern. However, keeping in perspective the objects tor which the Code has been brought into force and to balance the interest of all stakeholders, we are satisfied that the instant application warrants to be admitted to prevent further erosion of capital and to safeguard the assets of the Applicant Company/Corporate Debtor. Also declare a moratorium in relation to the required matters as contemplated under Section 14 of the Code

Issues Involved:
1. Compliance with statutory requirements for filing the application.
2. Financial and operational debt details.
3. Appointment and eligibility of the Interim Resolution Professional.
4. Default and SARFAESI notices.
5. Financial statements and liabilities.
6. Admission of the application and commencement of the corporate insolvency resolution process.
7. Declaration of moratorium and related directions.

Detailed Analysis:

1. Compliance with Statutory Requirements for Filing the Application:
The application was filed by the corporate debtor under Section 10 of the Insolvency and Bankruptcy Code, 2016, in statutory form No.6 as prescribed by sub-rule (1) of rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Initially, there were deficiencies in the affidavit and other documents, which were rectified as directed by the tribunal.

2. Financial and Operational Debt Details:
The applicant company disclosed its financial and operational creditors, listing significant debts owed to Punjab National Bank, Canara Bank, ICICI Bank, and Siemens Financial Services Ltd., with a total debt raised from financial creditors amounting to ?206.64 crores and an amount in default of ?200.37 crores. The operational creditors included government departments, raw material suppliers, workers/employees, and service providers, with a total debt raised of ?10.34 crores and an amount in default of ?14.60 crores.

3. Appointment and Eligibility of the Interim Resolution Professional:
The applicant proposed Mr. Prakash Dev Sharma as the Interim Resolution Professional (IRP), who filed the necessary written communication in form No.2, declaring his eligibility and absence of any disciplinary proceedings against him. The tribunal confirmed his appointment for a period of thirty days or as determined by the Committee of Creditors.

4. Default and SARFAESI Notices:
The applicant represented defaults in payment of dues leading to notices under Section 13(2) and 13(4) of the SARFAESI Act, 2002, issued by Punjab National Bank, Canara Bank, ICICI Bank, and Siemens Financial Services Ltd., for amounts of ?118.70 crores, ?67.12 crores, ?8.15 crores, and ?6.40 crores respectively.

5. Financial Statements and Liabilities:
The applicant provided audited financial statements for the years ending 31.03.2015 and 31.03.2016, and unaudited statements for the period up to 26.03.2017. The accumulated losses, long-term borrowings, current liabilities, and revenue from operations were detailed, indicating significant financial distress and a debt trap.

6. Admission of the Application and Commencement of Corporate Insolvency Resolution Process:
The tribunal found that the application met the requirements of Section 10 of the Code, indicating the existence of a corporate debtor and default. The tribunal admitted the application to prevent further erosion of capital and safeguard the assets of the corporate debtor, directing the IRP to take control of the management and assets.

7. Declaration of Moratorium and Related Directions:
The tribunal declared a moratorium as per Section 14 of the Code, prohibiting:
(a) Institution or continuation of suits or proceedings against the corporate debtor.
(b) Transfer or disposal of the corporate debtor’s assets.
(c) Actions to foreclose or enforce security interests.
(d) Recovery of property occupied by the corporate debtor.
The IRP was directed to make a public announcement and file weekly reports on the progress of the insolvency resolution process.

Conclusion:
The tribunal admitted the application for initiating the corporate insolvency resolution process, appointed Mr. Prakash Dev Sharma as the IRP, declared a moratorium, and issued directions to ensure compliance with the Code and safeguard the interests of all stakeholders.

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