2018 (5) TMI 858 - Tri - Insolvency and Bankruptcy

Initiation of corporate insolvency resolution process by financial creditor - Held that - Form and manner of the application has to be the one as prescribed. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of IBC. We are satisfied that a default has occurred and the application under sub section 2 of Section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. Thus, the application warrant admission. This petition is admitted and Mr. Huzefa Fakhri Sitabkhan, 1012, Dalamal Towers, Free Press Journal Road, 211, Nariman Point, Mumbai -400021 is appointed as an Interim Resolution Professional.

Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Default and admission of debt by the Corporate Debtor.
3. Appointment and qualifications of the Interim Resolution Professional.
4. Declaration of moratorium and its implications.
5. Duties and responsibilities of the Interim Resolution Professional.

Issue-wise Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The ICICI Bank Limited (Financial Creditor) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Insolvency Resolution Process against Essar Power Jharkhand Limited (Corporate Debtor). The application was supported by a Board Resolution dated 27.10.2017 authorizing Mr. Shashank Raj to submit and sign the petition. The Corporate Debtor was incorporated on 19.10.2005 under the Companies Act, 2013, with a substantial authorized and paid-up share capital.

2. Default and admission of debt by the Corporate Debtor:
The Financial Creditor disclosed that the total debt granted to the Corporate Debtor was ?3033,29,45,267.73, with the default amounting to ?3468,29,05,888.46 as of 15.12.2017. The details of the debt, including disbursed amounts, security held, and other financial facilities, were provided. The Corporate Debtor, through its counsel, orally admitted to the default and did not object to the petition's admission. This admission was later confirmed by an affidavit from Ms. Shruti Verma, authorized by a Board Resolution dated 10.05.2017.

3. Appointment and qualifications of the Interim Resolution Professional:
Initially, the proposed Interim Resolution Professional (IRP) was found to have potential biases. Consequently, the Financial Creditor was directed to propose a new IRP. Mr. Huzefa Fakhri Sitabkhan was proposed and accepted as the IRP. His qualifications, including registration with the Insolvency and Bankruptcy Board of India, were verified, and it was confirmed that no disciplinary proceedings were pending against him.

4. Declaration of moratorium and its implications:
Upon admitting the application, the Tribunal declared a moratorium as per Section 14 of the Code. This moratorium included prohibitions on:
- Institution or continuation of suits or proceedings against the Corporate Debtor.
- Transferring or disposing of any assets of the Corporate Debtor.
- Actions to foreclose or enforce any security interest.
- Recovery of property occupied by the Corporate Debtor.
The moratorium does not apply to transactions notified by the Central Government and ensures the supply of essential goods and services remains uninterrupted.

5. Duties and responsibilities of the Interim Resolution Professional:
The IRP is tasked with performing functions as per Sections 15, 17, 18, 19, 20, and 21 of the Code. These include making public announcements, managing the affairs of the Corporate Debtor, and preserving its property value. The personnel connected with the Corporate Debtor are legally obligated to assist the IRP. Any non-cooperation from the ex-management or directors can lead the IRP to seek appropriate orders from the Tribunal.

Conclusion:
The Tribunal admitted the petition, appointed Mr. Huzefa Fakhri Sitabkhan as the IRP, and declared a moratorium. The IRP is expected to perform his duties with integrity and in accordance with the Code. The order was directed to be communicated to the relevant parties within seven days.

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