2018 (7) TMI 394 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - Held that - The liability of the Principal Borrower and the Guarantor is co-extensive and that the Beneficiary of a Guarantee is not required to exhaust its remedies against the Principal borrower before proceeding against the guarantors This petition is admitted and Mr. Sethurathnam Ravi, 505-A, 5th Floor, Rectangle 1, District Centre, Saket, New Delhi-110017, email id - [email protected], Registration No. IBBI/IPA-001/IP-P00372/2017-18/10629 is appointed as an Interim Resolution Professional. In pursuance of Section 13(2) of the Code, we direct that Interim Insolvency Resolution Professional shall immediately make public announcement with regard to admission of this application under Section 7 of the Code

Summary

Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Details and validity of the financial debt and guarantee.
3. Default and legal proceedings against the Corporate Debtor.
4. Requirements and compliance for initiating Corporate Insolvency Resolution Process (CIRP).
5. Appointment and duties of the Interim Resolution Professional (IRP).
6. Declaration of moratorium and its implications.

Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Financial Creditor filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (the Code) to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Financial Creditor is a company incorporated under the Companies Act, 1956, with its registered office in Mumbai.

2. Details and Validity of the Financial Debt and Guarantee:
The Financial Creditor provided details of the financial debt granted to All India Society for Advance Education and Research (Original Borrower), which was guaranteed by the Corporate Debtor under a Deed of Guarantee dated 18-10-2013. The loan amount of ?38,00,00,000 was disbursed in two tranches on 28th October 2013 and 1st November 2013. The Corporate Debtor guaranteed the repayment of this debt.

3. Default and Legal Proceedings Against the Corporate Debtor:
The Financial Creditor claimed that the loan facility availed by the Original Borrower was overdue, with a total amount in default of ?40,28,76,461 as of 30-09-2017. The Financial Creditor had filed a civil suit against the Original Borrower and the guarantors, including the Corporate Debtor, which is pending adjudication. The Principal Borrower admitted liability and the validity of the Guarantee in its written statement but requested loan restructuring.

4. Requirements and Compliance for Initiating CIRP:
The application was filed in the prescribed form under Rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, read with Section 7(2) of the Code. The Tribunal found the application complete and satisfying the requirements of Section 7(5) of the Code, confirming that a default had occurred, and no disciplinary proceedings were pending against the proposed Interim Resolution Professional (IRP).

5. Appointment and Duties of the Interim Resolution Professional (IRP):
Mr. Sethurathnam Ravi was proposed and appointed as the IRP. He declared no disciplinary proceedings against him and no relation to the Corporate Debtor. The IRP is mandated to perform duties as per Sections 15, 17, 18, 19, 20, and 21 of the Code, ensuring fairness, integrity, and cooperation from the Corporate Debtor's management.

6. Declaration of Moratorium and Its Implications:
The Tribunal declared a moratorium under Section 14 of the Code, prohibiting:
- Institution or continuation of suits or proceedings against the Corporate Debtor.
- Transferring, encumbering, or disposing of any assets of the Corporate Debtor.
- Actions to foreclose or enforce any security interest.
- Recovery of property by owners or lessors in possession of the Corporate Debtor.

The moratorium does not apply to transactions notified by the Central Government, and the supply of essential goods or services to the Corporate Debtor must continue uninterrupted.

Conclusion:
The petition was admitted, and the IRP was directed to make a public announcement regarding the admission and to follow best practices during the CIRP. The Tribunal emphasized the legal obligation of the Corporate Debtor's personnel to cooperate with the IRP and the IRP's duty to protect the value of the Corporate Debtor's property.