2017 (12) TMI 1036 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - default in payment of huge debt - Held that - The record of the financial debt as per the Books of the Corporate-Applicant; certificate of eligibility of the Interim Resolution Professional, updated 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. The copies of notices issued by the financial creditors and recovery certificate issued against Applicant Company can be termed as conclusive proof of default. There has been admission of default also. In the light of default in payment of such huge debt, 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 requisite form-6 containing the required particulars in terms of sub-section (2) of Section 10 of the Code. The applicant 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 as per sub-section (5) of Section 10 of the Code.

Issues Involved:
1. Jurisdiction of the Tribunal.
2. Eligibility of the applicant to file under Section 10 of the Insolvency and Bankruptcy Code (IBC).
3. Compliance with Section 10(3) of the IBC.
4. Financial default and its implications.
5. Objections raised by the financial creditor.
6. Relevance of recovery certificates and pending proceedings.
7. Admissibility of the application and initiation of Corporate Insolvency Resolution Process (CIRP).

Detailed Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal has territorial jurisdiction over the place where the registered office of the applicant company, M/s. Asis Plywood Limited, is located. The registered office is in New Delhi, making this Tribunal the Adjudicating Authority under Section 60(1) of the IBC.

2. Eligibility of the Applicant to File under Section 10 of the IBC:
The application was filed by Mr. S.N. Gupta, the authorized representative of M/s. Asis Plywood Limited, under Section 10 of the IBC. The applicant company is a corporate applicant as defined under Section 5(5) of the Code, which includes the corporate debtor itself. The authorized representative was duly empowered by a board resolution dated 12.10.2017.

3. Compliance with Section 10(3) of the IBC:
The applicant complied with Section 10(3)(a) by submitting audited financial statements for the last two financial years and provisional financial statements for the current year. Additionally, the applicant proposed Mr. Devendra Padamchand Jain as the Interim Resolution Professional (IRP) and obtained his written consent in Form-2, confirming his qualifications and absence of disciplinary proceedings.

4. Financial Default and Its Implications:
The applicant company had availed various credit facilities from Janakalyan Sahakari Bank Ltd. and State Bank of India. Due to adverse operational conditions, the company became a sick industrial company with a negative net worth. The company also provided a corporate guarantee for loans availed by M/s. Shirdi Industries Limited, which also defaulted, leading to SARFAESI actions and recovery proceedings. Notices under Section 13(2) of the SARFAESI Act and recovery certificates confirmed the default.

5. Objections Raised by the Financial Creditor:
The financial creditor, Jan Kalyan Sahakari Bank, objected to the application, alleging it was filed to defeat court decrees and recovery certificates. However, they could not point out any defects in the financial statements submitted by the applicant. The Tribunal noted that the financial creditor did not dispute the default.

6. Relevance of Recovery Certificates and Pending Proceedings:
The Tribunal referred to the case of Annapurna Infrastructure (P.) Ltd. v. SORIL Infra Resources Ltd., where it was held that the pendency of execution proceedings does not bar the initiation of insolvency proceedings under the IBC. The recovery certificate itself confirmed the default, which justified the initiation of the CIRP.

7. Admissibility of the Application and Initiation of CIRP:
The Tribunal found the application complete, meeting all statutory requirements under Section 10 of the IBC. The applicant disclosed all necessary details, including particulars of the corporate applicant, financial debt, and proposed IRP. The Tribunal admitted the application under Section 10(4)(a) of the Code, commencing the CIRP from the date of the order.

Moratorium and Interim Resolution Professional:
A moratorium was issued under Section 14 of the Code, prohibiting suits, asset transfers, foreclosure actions, and recovery of property. Essential goods and services to the corporate debtor were to remain uninterrupted. Mr. Devendra Padamchand Jain was appointed as the IRP, directed to submit his report within 30 days.

Conclusion:
The Tribunal admitted the application for initiation of CIRP, finding it complete and compliant with statutory requirements. The moratorium was imposed, and an IRP was appointed to take necessary steps as per the IBC.

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