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2017 (10) TMI 293 - Tri - Insolvency and BankruptcyCorporate Insolvency Resolution Process - petition under Insolvency and Bankruptcy Code, 2016 - Held that - We are of the considered view that the Corporate Debtor has failed to satisfy the Adjudicating Authority as per various provisions especially Section 10 of IBC, for admission of the case. Therefore, it is not a fit case to admit the case. The account of Corporate Debtor was classified as NPA as early as 26.12.2013 and bank has spent sufficient time, money and energy to recover the debt from the Corporate Debtor, which could be seen from the pre-paras. In the interest of the case, we would like to narrate few important steps taken by the bank such as number of default notices issued to the Corporate Debtor, legal notices issued to the Corporate Debtor and also to the guarantors, demand notice issued under section 13(2) of the SARFAESI Act. The Demand notice got published in Deccan Chronicle and Eenadu in January, 2013, rejoinder issued on 04.03.2017, Possession Notice dated 17.04.2017 got issued under Rule 8(1) of Security Interest (Enforcement) Rules, 2002 and again published in Indian Express and Andhra Jyothy in April, 2017, Notice Prior to Sale under Rule 8(5) and 8(6) of Security Interest (Enforcement) Rules in May 2017 and E-auction sale notice in July, 2017 etc, which involved substantial cost to the Financial Creditor/Bank. Therefore, we impose a cost of ₹ 10 lakhs on the Corporate Debtor.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency and Bankruptcy Code, 2016. 2. Default and classification of loan account as Non-Performing Asset (NPA). 3. Actions taken by the Financial Creditor under the SARFAESI Act. 4. Allegations of mala fide intentions and suppression of material facts by the Corporate Debtor. 5. Criteria for admission of a case filed under Section 10 of IBC, 2016. 6. Imposition of costs for malicious or fraudulent initiation of proceedings. Issue-wise Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency and Bankruptcy Code, 2016: The Corporate Debtor, Neeta Chemicals (I) Pvt. Ltd., filed a petition under Section 10 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate CIRP. The petition was filed in Form 6, and all necessary details and documents were provided, including defaults towards the State Bank of India (SBI) and other creditors. 2. Default and classification of loan account as Non-Performing Asset (NPA): The Corporate Debtor obtained a loan of ?65.50 Crores from SBI, which was later enhanced to ?197.50 Crores. The loan account was classified as NPA on September 26, 2013, due to consecutive defaults in repayment. Despite numerous default notices and meetings to resolve the issue, the Corporate Debtor failed to settle the outstanding amount. 3. Actions taken by the Financial Creditor under the SARFAESI Act: SBI issued a Legal Notice on November 22, 2016, demanding payment of ?324,64,55,653/-. Subsequently, a Demand Notice under Section 13(2) of the SARFAESI Act was issued on December 1, 2016, demanding ?329,71,74,696/- within 60 days. Possession Notices were issued on April 17, 2017, and an E-Auction Sale Notice was published on July 18, 2017, with the auction scheduled for August 28, 2017. 4. Allegations of mala fide intentions and suppression of material facts by the Corporate Debtor: The Financial Creditor opposed the application, alleging that the Corporate Debtor filed the petition with mala fide intentions to circumvent the SARFAESI proceedings. It was contended that the Corporate Debtor did not approach the Tribunal with clean hands and suppressed material facts. The Financial Creditor argued that the petition was filed at the eleventh hour to stifle the SARFAESI proceedings. 5. Criteria for admission of a case filed under Section 10 of IBC, 2016: The Tribunal emphasized that the application under Section 10 should not be admitted mechanically. The Adjudicating Authority must verify relevant facts and satisfy itself that the criteria under Section 10 are met. The Tribunal noted that the Corporate Debtor's replies to the Bank's notices denied the existence of any default, which contradicted the claims made in the CIRP application. 6. Imposition of costs for malicious or fraudulent initiation of proceedings: The Tribunal found that the Corporate Debtor's application was filed with frivolous and mischievous grounds, with a mala fide intention to misuse the provisions of IBC. The Tribunal imposed a cost of ?10 lakhs on the Corporate Debtor, payable to SBI by August 31, 2017, for the malicious initiation of proceedings. Conclusion: The Tribunal dismissed the petition filed by the Corporate Debtor under Section 10 of the Insolvency and Bankruptcy Code, 2016, with a cost of ?10 lakhs imposed on the Corporate Debtor for filing the application with mala fide intentions and unclean hands. The Tribunal emphasized that the Adjudicating Authority must apply the law correctly and not act mechanically in admitting applications under IBC.
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