2017 (8) TMI 1258 - Tri - Insolvency and Bankruptcy

Initiating Insolvency Resolution Process against the Applicant Company - issuance of directions activating the moratorium under Section 14 - Held that - The petitioner has disclosed all the details required by Section 10 of the Code read with Rule-7 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The particulars of the corporate applicants and those of the financial debt have been disclosed in all material particulars. The name of the Interim Resolution Professional has also been proposed. The record of the financial debt as per the Books of the Corporate-Applicant; and record of the Operational Debtors ; certificate of eligibility of the Interim Resolution Professional, Books of Accounts showing default; copies of the audited financial statement for the Financial Year ending 31.03.2016 and 31.03.2015. (Annexure - P) all have been placed on record. A list of assets and liabilities as on 31.03.2016 has also been disclosed. The petitioner satisfies all the statutory requirements. The respondent has not been able to point out any defect warranting refusal to admit the petition. Therefore, we are inclined to admit the petition. As a sequel to the above discussion, the petition is admitted. As a necessary consequence, we declare a moratorium for the purposes referred to in Section 14 of the Code and direct the Interim Resolution Professional to make a public announcement of the initiation of corporate Insolvency Resolution Process and call for the submission of claims under Section 14 of the Code. The moratorium as contemplated in Section 14 shall come in operation with the exceptions as enumerated in Section 14(2) and (3).

Issues Involved:
1. Jurisdiction of the Tribunal
2. Authorization for filing the insolvency application
3. Financial creditors and their claims
4. Operational creditors and debtors
5. Historical financial difficulties and previous BIFR proceedings
6. Entitlement to file the insolvency petition under the SICA Repeal Act
7. Declaration of sickness and appointment of an operating agency
8. Proposal of Interim Resolution Professional (IRP)
9. Service of notice to financial creditors
10. Objections from financial creditors
11. Compliance with statutory requirements for initiating CIRP
12. Admission of the petition and declaration of moratorium

Detailed Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal confirmed its jurisdiction over the case as the registered office of the Applicant Company is located in Delhi.

2. Authorization for filing the insolvency application:
The Applicant Company, M/s Amit Spinning Industries Ltd., authorized Mr. Vijay Bhan Singh, Director, through a Board resolution dated 12.05.2017, to file the insolvency application.

3. Financial creditors and their claims:
- Axis Bank Ltd.: Granted a loan facility of ?5365 lakhs in 2006. Security was created in favor of Axis Bank.
- UCO Bank Ltd.: Granted a loan facility of ?1250 lakhs in 2011, later assigned to JM Financial Asset Reconstruction Company Pvt. Ltd. in 2014.

4. Operational creditors and debtors:
The list of operational creditors and the total receivables as of 20.05.2017 were provided.

5. Historical financial difficulties and previous BIFR proceedings:
The Applicant Company faced losses due to erratic demand, uncertain raw material prices, foreign currency fluctuation, and changes in Government Policy. It was declared sick by BIFR on 18.07.2012, and UCO Bank was appointed as the operating agency. However, no revival plan was filed before BIFR.

6. Entitlement to file the insolvency petition under the SICA Repeal Act:
The Corporate Applicant is entitled to file the insolvency petition as per section 4(b) of the SICA Repeal Act read with Sec. 252 of the Insolvency and Bankruptcy Code, 2016, without any fees, as the petition was filed within 180 days from the date of the SICA Repeal Act coming into force.

7. Declaration of sickness and appointment of an operating agency:
The Corporate Applicant was declared sick by BIFR on 18.07.2012, and UCO Bank was appointed as the operating agency.

8. Proposal of Interim Resolution Professional (IRP):
Initially, Mr. Manish Garg was proposed as the IRP, but was later replaced by Shri Praveen Bansal. The written communication by the proposed IRP in Form-2 was attached.

9. Service of notice to financial creditors:
The Corporate Applicant served a copy of the insolvency petition along with the Tribunal's Order dated 02.06.2017 to the financial creditors, namely Axis Bank and JM Financial Asset Reconstruction Company Pvt. Ltd.

10. Objections from financial creditors:
- Axis Bank: Did not oppose the application.
- JM Financial Asset Reconstruction Company Pvt. Ltd.: Highlighted that the Corporate Applicant had enjoyed moratorium under SICA for over five years without presenting a viable revival scheme and suggested that the resolution process should be concluded within 100 days.

11. Compliance with statutory requirements for initiating CIRP:
The Tribunal confirmed that the Applicant complied with all statutory requirements under Section 10 of the Code and Rule-7 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The details of financial creditors, operational creditors, assets, liabilities, and the proposed IRP were adequately disclosed.

12. Admission of the petition and declaration of moratorium:
The petition was admitted, and a moratorium was declared under Section 14 of the Code. The Interim Resolution Professional was directed to make a public announcement and call for the submission of claims. The Tribunal emphasized that the Insolvency Resolution Process should be completed preferably within 100 days due to the Applicant's previous moratorium under SICA.

Conclusion:
The petition was disposed of with the admission of the insolvency application, declaration of moratorium, and instructions for a swift resolution process.

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