2018 (11) TMI 1045 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - violation committed by the ex-management or any tainted/illegal transaction by ex-directors or anyone else the Interim Resolution Professional/Resolution Professional - Held that - Corporate Debtor-Respondent would reveal that a design effort has been made to impede the insolvency proceedings by seeking time over and over again for filing reply. The leniency shown by the Bench has been misused to the hilt. Order dated 28.08.2018 was passed whereby direction was issued that in case reply was not filed then the defence of the respondent was to be struck off and no reply was to be taken on record, and, inspite of said specific direction no reply has been filed. Corporate Debtor-Respondent deliberately delayed the proceeding so as to avoid the initiation of Corporate Insolvency Resolution Process. This case thus is a classic example of such a conduct. We say no more on this issue. The office is directed to communicate a copy of the order to the Financial Creditor, the Corporate Debtor, the Interim Resolution Professional and the Registrar of Companies, NCR, New Delhi at the earliest but not later than seven days from today. The Registrar of Companies shall update his website by updating the status of Corporate Debtor and specific mention regarding admission of this petition must be notified to the public at large.

Issues Involved:

1. Triggering the Corporate Insolvency Resolution Process (CIRP).
2. Authorization and documentation for the application.
3. Details of the financial transaction and default.
4. Legal actions taken prior to the application.
5. Compliance with procedural requirements under the Insolvency and Bankruptcy Code (IBC).
6. Conduct and response of the Corporate Debtor.
7. Admission of the application and appointment of Interim Resolution Professional (IRP).
8. Declaration of moratorium and its implications.

Issue-wise Detailed Analysis:

1. Triggering the Corporate Insolvency Resolution Process (CIRP):
The Financial Creditor, Arete Service Private Limited, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the CIRP against M/s. Soma Network Software Engineering Private Limited.

2. Authorization and Documentation for the Application:
Mr. Mrugesh D. Oza, a director of the Financial Creditor, was authorized by a Board Resolution dated 25.01.2018 to sign and submit the petition. The Corporate Debtor was incorporated with an authorized share capital of ?10,00,00,000/- and a paid-up share capital of ?9,93,98,710/-.

3. Details of the Financial Transaction and Default:
The Financial Creditor lent ?5,00,00,000/- to the Corporate Debtor under a Bridge Loan Agreement dated 27.02.2010, with repayment due by 31.07.2010 and interest at 10% per annum. The Corporate Debtor issued several cheques which were not honored due to insufficient funds, leading to a default.

4. Legal Actions Taken Prior to the Application:
The Financial Creditor filed a complaint under Section 138 read with Section 142 of the Negotiable Instrument Act and initiated recovery proceedings under Order XXXVII of the Civil Procedure Code. A decree dated 04.09.2017 from the Commercial Court at Vadodara ordered the defendants to pay ?7,44,45,205/- with interest at 9% per annum.

5. Compliance with Procedural Requirements under the Insolvency and Bankruptcy Code (IBC):
The application was found to be complete as per Section 7(2) of the Code and other conditions prescribed by Rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The name of the proposed resolution professional, Shri Alok Chandra Singh, was specified, and no disciplinary proceedings were pending against him.

6. Conduct and Response of the Corporate Debtor:
Despite multiple opportunities and extensions granted by the Tribunal, the Corporate Debtor failed to file a reply or pay the imposed costs. This conduct was seen as an attempt to impede the insolvency proceedings.

7. Admission of the Application and Appointment of Interim Resolution Professional (IRP):
The Tribunal admitted the application, appointed Shri Alok Chandra Singh as the Interim Resolution Professional, and directed him to make a public announcement regarding the admission of the application under Section 7 of the Code.

8. Declaration of Moratorium and Its Implications:
A moratorium was declared under Section 14 of the Code, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovery of property by owners or lessors. The moratorium ensures that the Corporate Debtor's assets are preserved during the CIRP.

Conclusion:
The Tribunal found the application complete and in compliance with the IBC, admitted the petition, appointed an IRP, and declared a moratorium to facilitate the CIRP. The Corporate Debtor's repeated delays and non-compliance were noted as deliberate attempts to avoid the process. The order was directed to be communicated to relevant parties and the Registrar of Companies for public notification.

← Previous Next →