2017 (7) TMI 971 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - The Insolvency & Bankruptcy Code 2016 - Held that - The debtor company defaulted in repaying its debt to the financial creditor, this Bench hereby admits this application prohibiting all of the following of item-I, namely - (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, Tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(SARFAESI Act); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. (II) That supply of essential goods or services to the corporate debtor if continuing, shall not be terminated or suspended or interrupted during moratorium period. (III) That the provisions of sub-section (1) Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. (IV) That the order of moratorium shall have effect from 06.06.2017 till completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, as the case may be. (V) That the public announcement of the corporate insolvency resolution process shall be made immediately as specified under section 13 of the Code. (VI) That this Bench hereby appoints, Mr. Dhinlal Shah, 9, Urmikunj Society, Nr. St. Xavier s College Corner, Navrangpura, Ahmadabad- 380009, Gujarat, India, Registration Number IBBI/IPA-01/2016-17/015, as Interim Resolution Professional to carry the functions as mentioned under Insolvency & Bankruptcy Code.

Issues Involved:
1. Maintainability of the company petition (CP) under section 7 of the Insolvency & Bankruptcy Code 2016.
2. Requirement of record or evidence of default.
3. Adjudication of the claim.
4. Production of financial records and statements.
5. Pending company petitions before the High Court.
6. Definition of 'financial creditor'.
7. Compliance with prescribed form and procedural requirements.
8. Provision of additional facilities by IDBI Bank.
9. Payment of stamp duty on the Assignment Agreement.

Detailed Analysis:

1. Maintainability of the Company Petition:
The corporate debtor argued that the CP is not maintainable due to the absence of records or evidence of default as specified under section 240 (2) (f) of the Code. The tribunal clarified that section 7 (3) of the Code allows for three distinct modes to prove default: records with information utility, other specified records, or other specified evidence. The tribunal found that the financial creditor had provided sufficient evidence under the second and third modes, making the CP maintainable.

2. Requirement of Record or Evidence of Default:
The corporate debtor contended that the CP could not be filed without a record of default recorded with the information utility. The tribunal noted that information utility centers were not operational at the time of filing the CP, and the requirement to file such records is optional, not mandatory. The tribunal concluded that the financial creditor had furnished adequate records and evidence of default as specified by the regulations.

3. Adjudication of the Claim:
The corporate debtor argued that the claim was not adjudicated and therefore not a debt under section 3 (11) of the Code. The tribunal dismissed this objection, stating that the financial creditor had provided sufficient evidence of the debt and default, including financial contracts, statements, and assignment agreements.

4. Production of Financial Records and Statements:
The corporate debtor claimed that the financial creditor had not produced records evidencing the amounts committed and financial statements showing non-repayment. The tribunal found that the financial creditor had submitted all necessary documents, including financial contracts, statements, and evidence of the invocation of pledged shares, proving the debt and default.

5. Pending Company Petitions Before the High Court:
The corporate debtor argued that the CP should be dismissed due to pending company petitions before the High Court of Bombay. The tribunal clarified that the Insolvency and Bankruptcy Code has an overriding effect on other laws and that pending proceedings do not impede the initiation of insolvency proceedings under section 7 of the Code.

6. Definition of 'Financial Creditor':
The corporate debtor contended that the applicant did not fall within the definition of 'financial creditor' as the transactions were between the debtor company and IDBI, not with Edelweiss Trust or EARC. The tribunal held that the assignment of debt to the applicant made it a valid financial creditor under the Code.

7. Compliance with Prescribed Form and Procedural Requirements:
The corporate debtor argued that the petition was not in the prescribed form and lacked necessary details. The tribunal found that the financial creditor had complied with all procedural requirements, including the submission of financial contracts, statements, and CIBIL reports, and dismissed the objection.

8. Provision of Additional Facilities by IDBI Bank:
The corporate debtor claimed that IDBI Bank failed to provide additional facilities as per the MRA, and therefore, there was no default. The tribunal noted that the debtor had failed to adhere to the MRA and that the banks had exited the CDR package, making this objection meritless.

9. Payment of Stamp Duty on the Assignment Agreement:
The corporate debtor argued that the assignment agreement was not duly stamped as per the Bombay Stamp Act 1958. The tribunal found that the requisite stamp duty had been paid and dismissed this objection as well.

Conclusion:
The tribunal admitted the company petition, initiating the corporate insolvency resolution process against the corporate debtor. It appointed an Interim Resolution Professional and imposed a moratorium on the institution of suits, transfer of assets, and other actions against the corporate debtor. The tribunal directed the public announcement of the corporate insolvency resolution process and communicated the order to the financial creditor and the corporate debtor.

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