2019 (4) TMI 735 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - sub-rule (1) of Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Held that - Under Section 10 of the Code the Adjudicating Authority is not empowered to go beyond the record as prescribed under section 10 and the information is required to be submitted in form 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 subject to ineligibility prescribed under Section 11 and if all the information is provided by the corporate debtor as also the mandatory requirements under Section 10 and form No. 6 are complete then it is to be admitted if otherwise not ineligible under Section 11. Pendency of DRT proceedings and or initiation of action under SARFAESI Act cannot be an impediment or bar to initiate the Corporate Insolvency Resolution Process under Section 7 of the Code nor it can be a ground to reject the Resolution Petition. A perusal of the petition goes to show that it is complete in all respects. Further, admittedly, M/s. A.P.I. Industries Private Limited is liable to pay financial debts to its Financial Creditors. No other objection has been raised by the Financial Creditors or by any other person. The materials on record clearly establish that financial debt is due from the Corporate Debtor to the Financial Creditors and there is occurrence of debt by the Corporate Debtor in repayment of financial debt. This Adjudicating Authority is of the considered view that this is a fit case to admit the petition triggering Corporate Insolvency Resolution Process and accordingly this petition is admitted under Section 10(4)(a) of the Code - Application disposed off.

Issues Involved:
1. Validity of the petition under Section 10 of the Insolvency and Bankruptcy Code, 2016.
2. Objections raised by the financial creditor, State Bank of India.
3. Compliance with procedural requirements and completeness of the application.
4. Appointment of Interim Insolvency Resolution Professional.
5. Declaration of moratorium.

Issue-wise Detailed Analysis:

1. Validity of the petition under Section 10 of the Insolvency and Bankruptcy Code, 2016:
A.P.I. Industries Private Limited filed a petition under Section 10 of the Insolvency and Bankruptcy Code, 2016, for initiating the Corporate Insolvency Resolution Process (CIRP). The Board of Directors authorized Mr. Bhushan Chandrakant Vayeda to file this petition. The petition was filed in the prescribed statutory form No. 6 as per the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The corporate debtor provided detailed information about its financial creditors, operational creditors, statutory liabilities, and contingent liabilities.

2. Objections raised by the financial creditor, State Bank of India:
State Bank of India (SBI), the financial creditor, raised objections to the petition, arguing that it was misconceived, untenable, and suffered from various deficiencies. SBI contended that the corporate applicant was not functional and that the petition was filed to frustrate lawful recovery actions. SBI highlighted that they had filed O.A. No. 45 of 2016 before the Debts Recovery Tribunal (DRT) for a debt claim of ?41,54,47,880.53, which was adjudicated in their favor. SBI also mentioned that similar petitions were filed by inter-related debtors to obstruct recovery proceedings.

3. Compliance with procedural requirements and completeness of the application:
The Tribunal reviewed the documents submitted by the corporate debtor, including the board resolution, details of financial and operational creditors, ledger accounts, particulars of security, statutory liabilities, and notices under the SARFAESI Act. The petitioner provided relevant books of accounts, audited financial statements, and provisional financial statements. The Tribunal found that the petition was complete in all respects and that the corporate debtor had provided all necessary information as required under Section 10 and Form 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

4. Appointment of Interim Insolvency Resolution Professional:
The Tribunal appointed Mr. Kiran C. Shah as the Interim Insolvency Resolution Professional (IRP) under Section 13(1)(c) of the Code. The IRP was directed to make a public announcement of the initiation of the CIRP and call for submission of claims under Section 13(1)(b) read with Section 15 of the Code and Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

5. Declaration of moratorium:
The Tribunal declared a moratorium under Section 13(1)(a) of the Code, prohibiting the institution or continuation of suits or proceedings against the corporate debtor, transferring or disposing of its assets, and actions to foreclose or recover any security interest. The moratorium also prohibited the recovery of any property by an owner or lessor. The order of moratorium came into effect from the date of receipt of the authenticated copy of the order and would remain in force until the completion of the CIRP.

Conclusion:
The Tribunal admitted the petition under Section 10(4)(a) of the Insolvency and Bankruptcy Code, 2016, as it was found to be complete and in compliance with the procedural requirements. The objections raised by the State Bank of India were not sufficient to deny the admission of the petition. The Tribunal appointed an Interim Insolvency Resolution Professional and declared a moratorium to facilitate the Corporate Insolvency Resolution Process. The application was disposed of accordingly, with no order as to costs.

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