2018 (1) TMI 1248 - Tri - Insolvency and Bankruptcy

Corporate insolvency resolution process - Held that - The existence of default has been shown from abundant evidence on record. The corporate debtor in the reply is not denying that it is in default of payment to the Bank. The above is the requirement of the aforesaid provisions for enabling the Adjudicating Authority to admit the petition. I find that the application filed by the Financial Creditor in Form No.1 is complete in all respects. Therefore, the instant petition deserves to be admitted.

Issues Involved:
1. Validity of the petition filed by the Bank.
2. Compliance with Section 7 of the Insolvency and Bankruptcy Code, 2016.
3. Evidence of default by the Corporate Debtor.
4. Relevance of proceedings under SARFAESI Act, 2002.
5. Admissibility of the petition and declaration of moratorium.

Issue-wise Detailed Analysis:

1. Validity of the petition filed by the Bank:
The primary contention raised by the respondent was that the petition was not filed by a competent officer of the Bank and lacked appropriate authorization. The respondent referenced a similar case (ICICI Bank Ltd. Vs. Palogix Infrastructure Private Ltd) where specific authorization was required to initiate proceedings under the Code. However, the Tribunal found that the General Power of Attorney dated 05.11.2015, in favor of Mr. Navdeep, authorized him to take legal proceedings for the recovery of debts and to initiate insolvency proceedings. Additionally, the Circle Head of the Bank had provided clear instructions to file the petition. Thus, the Tribunal concluded that the petition was filed by a competent person.

2. Compliance with Section 7 of the Insolvency and Bankruptcy Code, 2016:
Sub-section (3) of Section 7 requires the Financial Creditor to furnish evidence of default, the name of the proposed Interim Resolution Professional, and any other specified information. The petitioner-bank complied with these requirements, including providing a written communication from the proposed Interim Resolution Professional in Form No.2. Although the form lacked a date, the Tribunal did not consider this a defect significant enough to reject the petition, as all other particulars were provided.

3. Evidence of default by the Corporate Debtor:
The petitioner-bank presented substantial evidence of default, including balance confirmation letters, statements of account certified under the Bankers Books Evidence Act, 1891, and a CIBIL report. The Tribunal noted that the respondent did not deny the default in its reply. Thus, the evidence provided by the petitioner was deemed sufficient to establish the occurrence of default.

4. Relevance of proceedings under SARFAESI Act, 2002:
The respondent argued that the petition was an attempt to overreach the SARFAESI Act proceedings. The Tribunal noted that the Insolvency and Bankruptcy Code, 2016, has an overriding effect as per Section 238, which states that the Code shall prevail notwithstanding any inconsistency with other laws. Therefore, the issues raised under the SARFAESI Act were not considered relevant for disposing of the petition under the Code.

5. Admissibility of the petition and declaration of moratorium:
The Tribunal found that the application filed by the Financial Creditor was complete and met all requirements under the Code. Consequently, the petition was admitted, and a moratorium was declared as per Section 14 of the Code. This moratorium prohibits the institution or continuation of suits, transferring or disposing of assets, and recovery actions against the Corporate Debtor. The moratorium remains effective until the completion of the corporate insolvency resolution process or until an order for liquidation is passed.

Conclusion:
The Tribunal admitted the petition filed by the Bank and declared a moratorium, directing that the supply of essential goods or services to the Corporate Debtor should not be interrupted during this period. The matter was adjourned for the formal appointment of the Interim Insolvency Resolution Professional.

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