2018 (6) TMI 1262 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - existence of default - petition filled by person authorized - Held that - Clause 24 clearly authorized the power of attorney to act on behalf of the Bank in all matters incidental to or arising out of the bankruptcy or insolvency or any compromise or arrangement with the creditors. In pursuance thereof, he has signed power of attorney, pleadings and other papers. Even otherwise the general Power of Attorney is a widely worded document and it has various clauses empowering the attorney to file any proceedings before Courts or Tribunal. Therefore, it is established that the petition has been filed by a person authorized in accordance with law. The affidavit and the vakalatnama have also been signed by the aforesaid officer. In view thereof, we do not find any substance in the objection raised on behalf of respondent. In order to ascertain whether the default has occurred it will be profitable to read Section 3(12) of the Code which states that default means non-payment of debt when whole or any part of the instalment of the debt has become due & payable and that the same has not been repaid by the Corporate Debtor . In the present case, it has come on record eminently that the default has occurred many a times. Therefore, it would not be such a substantial and a material factor warranting the dismissal of the application. The Resolution Professional shall have to proceed in accordance with the statement of accounts and other supporting evidence. The argument pressed to oppose the admission of the petition advanced on behalf of the Corporate Debtor cannot be accepted because the amount of default and unpaid debt as per the Statement of Accounts has been proved. Such a piece of documentary evidence result into a binding presumption. The Corporate Debtor has failed to rebut that legally binding presumption by producing any cogent documentary evidence to the contrary on record. Therefore, dispute concerning the Principal amounts shown in application as are different from amount given in account statements cannot conceded. The other arguments of the Corporate Debtor would also not cut any ice because during pendency of present application as well as after hearing the final arguments we have granted ample time to the Corporate Debtor to come forward and prevail upon the Financial Creditor to accept its offer. However, nothing could be achieved. We reserved the order and even during this interregnum period no fruitful result has come forward. Secondly the object of the Code to resolve the insolvency issue and it could not be achieved merely by refusing to admit the petition. The resolution as against liquidation would only be possible if the Corporate Insolvency Resolution Process is triggered and efforts in that direction are made. Therefore, admission of the petition cannot be successfully resisted on such a flimsy ground.

Summary

Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Authorization to file the application.
3. Financial debt and default.
4. Objections raised by the Corporate Debtor.
5. Appointment of Interim Resolution Professional.
6. Declaration of moratorium.

Issue-wise Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Financial Creditor, Bank of Baroda, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (the Code) to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s. Barnala Steel Industries Private Limited. The application was deemed complete and in accordance with the prescribed form and manner under Rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7(2) of the Code.

2. Authorization to file the application:
The Financial Creditor authorized Mr. Baru Singh Chauhan, through a power of attorney dated 24.01.2014, to submit and sign the petition. The Tribunal examined the power of attorney and other authorizations, including a Board Circular Resolution dated 14.11.2017, which authorized Chief Managers and above to initiate legal actions, including proceedings under the Code. The Tribunal found that the petition was filed by a duly authorized person.

3. Financial debt and default:
The Financial Creditor provided details of the financial debt, including a Cash Credit Facility initially sanctioned on 16.03.2001 and enhanced to ?75 Crores on 27.03.2015. The Corporate Debtor's account was declared a Non-Performing Asset (NPA) on 25.05.2016, with a total amount in default of ?80,46,50,066.57, and interest of ?11,26,95,099.73 till 30.09.2017. The Tribunal confirmed the occurrence of default based on the statement of accounts and other documentary evidence.

4. Objections raised by the Corporate Debtor:
The Corporate Debtor opposed the application on several grounds:
- Business losses due to increased power tariff, entry tax, recession in the steel industry, reduced steel prices, and lower demand.
- Defects in the application, such as the general nature of the power of attorney, missing board resolution, and lack of valuation of assets and latest balance sheet.
- The application signed by a General Power of Attorney Holder without specific authorization.
- Discrepancies in the principal amounts shown in the application and account statements.
The Tribunal dismissed these objections, emphasizing that the application met all legal requirements, and the discrepancies did not materially affect the admission of the application.

5. Appointment of Interim Resolution Professional:
The Financial Creditor proposed Mr. Satyendra Prasad Khorania as the Interim Resolution Professional (IRP), who was found to have no disciplinary proceedings against him and satisfied the requirements of Section 7(3)(b) of the Code. The Tribunal appointed him as the IRP and directed him to make a public announcement regarding the admission of the application.

6. Declaration of moratorium:
Upon admitting the application, the Tribunal declared a moratorium under Section 14 of the Code, prohibiting:
- Institution or continuation of suits or proceedings against the Corporate Debtor.
- Transfer, encumbrance, alienation, or disposal of any assets of the Corporate Debtor.
- Actions to foreclose, recover, or enforce any security interest created by the Corporate Debtor.
- Recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor.
The Tribunal clarified that the moratorium does not apply to transactions notified by the Central Government and ensured the supply of essential goods and services to the Corporate Debtor during the moratorium period.

Conclusion:
The Tribunal admitted the petition filed by the Financial Creditor, Bank of Baroda, under Section 7 of the Insolvency and Bankruptcy Code, 2016, and initiated the Corporate Insolvency Resolution Process against M/s. Barnala Steel Industries Private Limited. Mr. Satyendra Prasad Khorania was appointed as the Interim Resolution Professional, and a moratorium was declared in accordance with Section 14 of the Code.