2017 (10) TMI 915 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - main contention is relating to pendency of execution of award obtained by Sundaram Finance Ltd. against the Applicant Company and the pendency of Securitisation Application against the Corporate Applicant Company - Held that - The initiation of proceedings under the SARFAESI Act or the pendency of proceedings before the DRT and execution of Arbitral Award are no grounds for not commencing the Insolvency Resolution Process , in view of the overriding effect given to Section 238 of the Code. The pendency of other proceedings in respect of the debts due by the Corporate Debtor is not a ground not to admit this Application. Moreover, in view of Section 14 of the IB Code, all the proceedings pending before any other forum including the Debt Recovery Tribunal and City Civil Court will be stayed, if the Application is admitted. The object of the Code is, no doubt, to protect the genuine Corporate Debtors with a view to maximise their value of assets and find out a Resolution Plan to revive the Companies. Incidentally, in the process of evolving a Resolution Plan, there is an opportunity for the Corporate Debtor to have a moratorium and thereby delay the other recovery proceedings. But, that is only for a prescribed period of 180 days or for a further period of 90 days, if extended by the Adjudicating Authority. Therefore, to say that Corporate Debtor with a view to have the benefit of moratorium or with a view to delay the proceedings under the SARFAESI Act filed this Application do not merit acceptance. Another objection raised by the BOI is that the Corporate Applicant did not disclose about the pendency of proceedings in the Debt Recovery Tribunal, factually it is not correct. The Applicant along with the Application gave a list of all the proceedings pending in various Courts and enclosed all the documents pertaining to the litigation filed by or against the Corporate Applicant. Therefore, it cannot be said that Corporate Applicant suppressed the material facts and approached this Tribunal with unclean hands. The Application filed by the Corporate Applicant is complete in all respects. The option to recommend the name of IRP is given only to Applicant. No material is placed on record to indicate that IRP is interested in the Applicant Company. There is a right to Financial Creditors to replace IRP in the 1st meeting of Committee of Creditors. In view of the above discussion, this Application is admitted under Section 10(4)(a) of the Code.

Summary

Issues Involved:
1. Application under Section 10 of the Insolvency and Bankruptcy Code, 2016 for triggering Corporate Insolvency Resolution Process.
2. Disclosure of relevant facts by the Corporate Applicant in the application.
3. Objections raised by the Financial Creditors regarding the pendency of other legal proceedings.
4. Admissibility of the application despite objections raised by the Financial Creditors.
5. Appointment of Interim Insolvency Resolution Professional.
6. Order of moratorium under Section 13(1)(a) of the Insolvency and Bankruptcy Code.

Detailed Analysis:

1. The Applicant, a Company registered under the Companies Act, 1956, filed an Application under Section 10 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process. The application detailed the Company's financial situation, creditors, pending litigations, and proposed an Interim Resolution Professional.

2. The Applicant provided comprehensive details in the application, including the Company's financial status, creditors, operational creditors, assets, liabilities, guarantees, and pending litigations. The Board of Directors authorized the filing of the application, demonstrating compliance with necessary procedures.

3. Financial Creditors, including Bank of India and Sundaram Finance Ltd., raised objections citing the pendency of legal proceedings such as execution of an Arbitration Award and actions under the SARFAESI Act. However, the Tribunal noted that these proceedings do not bar the initiation of the Insolvency Resolution Process under Section 238 of the Code.

4. The Tribunal emphasized that the pendency of other legal actions does not preclude the admission of the application. Section 14 of the Insolvency and Bankruptcy Code provides for a stay on all proceedings upon admission of the application, ensuring a consolidated resolution process.

5. The Tribunal admitted the application under Section 10(4)(a) of the Code and appointed Mr. Dipak Jamanbhai Rachcha as the Interim Insolvency Resolution Professional. The Interim Professional was directed to initiate the Corporate Insolvency Resolution Process and call for submission of claims from creditors.

6. A moratorium was ordered under Section 13(1)(a) of the Code, prohibiting various actions against the Company, including suits, asset transfers, and enforcement of security interests. Exceptions were made for essential goods/services and transactions notified by the Central Government.

In conclusion, the Tribunal admitted the application, appointed an Interim Insolvency Resolution Professional, and imposed a moratorium to facilitate the Corporate Insolvency Resolution Process, ensuring a consolidated approach to resolve the Company's financial distress.