2017 (12) TMI 973 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Held that - We are of the view that the petitioner has disclosed all the details required by Section 10 of the Code read with Rule- 7 of the Rules. The particulars of the corporate applicant and those of the financial debt have been disclosed in 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 Account showing default; copies of the audited financial statement for the Financial Year ending 31.03.2016 and 31.03.2017, all have been placed on record. A list of assets and liabilities as on 31.03.2017 has also been duly reflected. It has been submitted that the applicant company is in dire need of a resolution plan in the interest of all the stakeholders. The present application has been filed in the requisite form-6 containing the required particulars in terms of sub-section 2 of section 10 of the Code. The petitioner satisfies all the statutory requirements. Therefore, we are inclined to admit the application. In view of the above, we are satisfied that the present application is complete and that the applicant corporate debtor has committed a default. Therefore, as the application is complete the present application is admitted under section 10 (4) (a) of the Code. The corporate insolvency resolution process shall commence from the date of this order under sub-section 5 of section 10 of the Code.

Summary

Issues:
1. Application under section 10 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.
2. Definition of Corporate Applicant under Section 5(5) of the Code.
3. Compliance with Section 10(3)(a) and (b) of the Code.
4. Default committed by the applicant company.
5. Objection raised by a financial creditor under SARFAESI Act.
6. Interpretation of judgments by NCLAT regarding insolvency proceedings during the pendency of other legal actions.
7. Provisions and objectives of the Insolvency & Bankruptcy Code, 2016.
8. Requirements for initiating Corporate Insolvency Resolution Process by the Corporate Debtor under Section 10 of the Code.

Analysis:
1. The application was filed under section 10 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process for the applicant company itself. The applicant, a company incorporated under the Companies Act, 1956, fulfilled the criteria to be considered a Corporate Applicant under Section 5(5) of the Code, allowing it to file the application for insolvency resolution.

2. The applicant company complied with the requirements of Section 10(3)(a) and (b) by submitting audited financial statements, proposing an Interim Resolution Professional, and providing necessary financial details, including defaults and creditor information. The applicant detailed its financial position, default amounts, and creditor notices, demonstrating eligibility to proceed with the insolvency resolution process.

3. The applicant company faced objections from a financial creditor under the SARFAESI Act, claiming that ongoing proceedings precluded insolvency proceedings. However, referencing relevant judgments, the Tribunal clarified that the initiation of proceedings under the SARFAESI Act did not bar insolvency proceedings under the Code, emphasizing the overriding effect of the Code's provisions.

4. The Tribunal analyzed the objectives of the Insolvency & Bankruptcy Code, 2016, highlighting its focus on reorganization and resolution of corporate entities to maximize asset value, promote entrepreneurship, and balance stakeholder interests. The Code's provisions aimed to streamline insolvency processes for effective resolution.

5. To initiate the Corporate Insolvency Resolution Process, the applicant company fulfilled the requirements outlined in Section 10 of the Code, providing necessary information, financial details, and proposing an Interim Resolution Professional. The Tribunal admitted the application, signaling the commencement of the insolvency resolution process and issuing a moratorium to protect the corporate debtor's assets during the proceedings.

6. The Tribunal appointed an Interim Resolution Professional to oversee the resolution process, directing timely actions as per the Code's provisions. The moratorium issued under Section 14 of the Code aimed to safeguard the corporate debtor's assets and ensure essential services continued uninterrupted during the resolution process.