2017 (10) TMI 147 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Insolvency & Bankruptcy Code, 2016 - Held that - Having heard the submission of Shri Bishwajit Dubey along with Shri Rahul Agarwal, Advocate for Financial Creditor as well as Shri R.P. Agrawal, Advocate for Corporate Debtor, the present petition deserves admission. Hence, it is admitted under the Section 7 of the I & B Code

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Financial Debt and Default
3. Security and Guarantees
4. Admission of the Petition
5. Appointment of Interim Resolution Professional (IRP)
6. Moratorium and its Effects

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The applicant, IDBI Limited, filed a petition under Section 7 of the Insolvency & Bankruptcy Code, 2016, along with Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, to initiate the CIRP against the corporate debtor company. The tribunal found the application complete and in conformity with Section 7 of the Code, which allows a financial creditor to initiate CIRP upon the occurrence of a default.

2. Financial Debt and Default:
The financial creditor provided comprehensive details of the financial debt, including four sanctioned loans totaling ?4650 Crores, with a novated amount of ?900 Crores, resulting in a total debt of ?3750 Crores. The defaulted amount as of June 15, 2017, was ?526.11 Crores, including both principal and overdue interest. The tribunal acknowledged the evidence of default provided by the financial creditor, which met the requirements of Section 3(11) and 3(12) of the Code.

3. Security and Guarantees:
The financial creditor detailed the security documents, including deeds of hypothecation, personal guarantees, indentures of mortgage, and a pledge of shares. The estimated market value of the assets was ?17116 Crores, with a distress value of ?14548 Crores. The tribunal reviewed these documents, which supported the financial debt and default claims.

4. Admission of the Petition:
The corporate debtor initially opposed the petition but later withdrew their objection, expressing no objection to the petition's admission. The tribunal noted this withdrawal and decided not to examine the merits of the initial objection. The consensus for early approval of the resolution plan among the financial creditor, other lenders, and the corporate debtor was also noted.

5. Appointment of Interim Resolution Professional (IRP):
The tribunal appointed Mr. Anuj Jain as the IRP, as there were no disciplinary proceedings against him. The IRP was tasked with carrying out functions as per the Code, including protecting and preserving the value of the corporate debtor's property and managing its operations as a going concern.

6. Moratorium and its Effects:
The tribunal imposed a moratorium under Section 14, effective from August 9, 2017, until the completion of the CIRP or approval of the resolution plan. The moratorium prohibited:
- Institution or continuation of suits or proceedings against the corporate debtor.
- Transferring, encumbering, or disposing of the corporate debtor's assets.
- Foreclosing, recovering, or enforcing any security interest.
- Recovery of property occupied by the corporate debtor.
The supply of essential goods or services to the corporate debtor was to continue without interruption during the moratorium period.

Conclusion:
The tribunal admitted the petition under Section 7 of the Insolvency & Bankruptcy Code, 2016, and directed the commencement of the CIRP. The IRP was appointed, and a moratorium was imposed to facilitate the resolution process. The order was communicated to the financial creditor, the corporate debtor, the IRP, and the Insolvency and Bankruptcy Board of India.