2018 (6) TMI 1192 - Tri - Insolvency and Bankruptcy

Initiation of corporate insolvency resolution process by financial creditor - Held that -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. It is also patent no disciplinary proceedings are pending against the proposed Interim Resolution Professional. Thus, the application warrant admission. As a sequel to the above discussion, this petition is admitted and Mr. Rajiv Chakraborty, 12 Sukhdev Vihar, Ist Floor, New Delhi-110025, email id [email protected] is appointed as an Interim Resolution Professional. In pursuance of Section 13(2) of IBC we direct that public announcement shall be immediately made by the Interim Resolution Professional with regard to admission of this application under Section 7 of the Code. We also declare moratorium in terms of Section 14 of the Code. The Interim Resolution Professional shall perform all his functions religiously as are contemplated, inter alia, by Sections 15, 17, 18, 19, 20 & 21 of the Code

Summary

Issues Involved:
1. Merger of Subsidiary Banks into State Bank of India.
2. Filing of Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016.
3. Authorization to File the Petition.
4. Financial Creditor's Evidence of Default.
5. Corporate Debtor's Opposition to the Petition.
6. Application for Impalement by Reliance India Power Fund.
7. Admission of Petition and Appointment of Interim Resolution Professional.

Issue-wise Detailed Analysis:

1. Merger of Subsidiary Banks into State Bank of India:
The judgment begins by noting the merger of five subsidiary banks into the State Bank of India (SBI), effective from 01.04.2017, as per the notification dated 22.02.2017. This merger positioned SBI among the world’s top 50 banks.

2. Filing of Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The State Bank of India filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Su Kam Power Systems Limited. The petition was filed due to the Corporate Debtor's failure to repay the debts amounting to ?69,21,64,938.70 as of 20.11.2017.

3. Authorization to File the Petition:
The petition was signed and submitted by Mr. Sanjay Prasad, Chief Manager and Relationship Manager of SBI, authorized by the Chairman of SBI under Section 27 of the SBI General Regulations, 1955. The authorization and proof of designation were placed on record.

4. Financial Creditor's Evidence of Default:
SBI provided comprehensive evidence of the default, including details of the debt, security interests, and the Corporate Debtor's acknowledgment of liabilities through revival letters. The default amount was substantiated by statements of accounts and balance confirmation letters. The Corporate Debtor's accounts were declared as Non-Performing Assets (NPA) on 10.09.2017.

5. Corporate Debtor's Opposition to the Petition:
The Corporate Debtor opposed the petition, arguing that a Joint Lender’s Forum (JLF) was exploring revival possibilities and that the petition was premature. This argument was rejected, referencing a similar case (State Bank of India v. Bhushan Steel Ltd.), where ongoing restructuring efforts under JLF were deemed beyond the scope of IBC. The Corporate Debtor's negotiation with a strategic investor was also dismissed as speculative.

6. Application for Impalement by Reliance India Power Fund:
Reliance India Power Fund filed an application for impalement, asserting its investment of ?45 crores in the Corporate Debtor and ongoing arbitration proceedings in the Bombay High Court. The Tribunal noted that the arbitration proceedings did not impede the initiation of CIRP under Section 7 of IBC, unlike Sections 8 and 9, which bar initiation if a dispute is pending.

7. Admission of Petition and Appointment of Interim Resolution Professional:
The Tribunal admitted the petition, satisfied that the application was complete, and no disciplinary proceedings were pending against the proposed Interim Resolution Professional, Mr. Rajiv Chakraborty. The Tribunal directed immediate public announcement of the admission and declared a moratorium under Section 14 of IBC, prohibiting suits, asset transfers, and recovery actions against the Corporate Debtor.

The Interim Resolution Professional was instructed to perform duties as per Sections 15, 17, 18, 19, 20, and 21 of the Code, ensuring cooperation from the Corporate Debtor's personnel and protecting the value of the Corporate Debtor's property. The office was directed to communicate the order to all relevant parties within seven days.

Conclusion:
The petition was admitted, and the CIRP was initiated against the Corporate Debtor, with Mr. Rajiv Chakraborty appointed as the Interim Resolution Professional. The Tribunal's order emphasized the procedural compliance and the necessity for cooperation from all stakeholders in the insolvency process. The application by Reliance India Power Fund was disposed of, allowing them to seek remedies as per the law.