2019 (5) TMI 383 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - financial creditor - default of payment of financial debt or not - Section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - There is no dispute in default of payment of financial debt, the application has been filed in Form 1 as prescribed in Section 4(1) of the Rules. The petitioner, therefore, has complied with the requirements of sub-sections (1) and (2) of Section 7 of the Code. To comply with the requirement of Clause (b) of Section 7(3) of the Code the petitioner-financial creditor in Part-III of the application proposed the name of Mr. Arunava Sikdar a registered Resolution Professional to be appointed as Interim Resolution Professional in case the application is admitted. The Resolution Professional has furnished the written communication in Form 2 as prescribed in Rule 9(1) of the Rules, which is at Annexure 6. All the necessary particulars as required in the Form have been furnished. It is certified that there are no disciplinary proceedings pending against him with the IBBI or ICAI or Insolvency Professionals Agency. He is appointed as the Resolution Professional in one case but not acting as Interim Resolution Professional/Liquidator in any other proceedings. The petition is liable to be admitted in terms of Clause (i) of Section 9(5) of the Code - The petition, therefore, is admitted and moratorium declared in terms of sub-section (1) of Section 14 of the code.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Compliance with procedural requirements of the Insolvency and Bankruptcy Code and related regulations.
3. Default on loan repayment by the corporate debtor.
4. Assignment of debt and substitution of the financial creditor.
5. Issuance of recovery certificates by Debt Recovery Tribunals (DRTs).
6. Appointment and role of the Interim Resolution Professional (IRP).
7. Declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petition was filed by the financial creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016, for initiating the CIRP against the corporate debtor. The application was submitted in Form 1 as per Rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

2. Compliance with Procedural Requirements:
The petitioner complied with sub-sections (1) and (2) of Section 7 of the Code by filing the application in the prescribed Form 1. The petitioner also fulfilled Clause (a) of Section 7(3) by providing sufficient evidence of default, including decrees passed by Debt Recovery Tribunals. The proposed name of Mr. Arunava Sikdar as the Interim Resolution Professional (IRP) was submitted in Part-III of the application, along with a written communication in Form 2 as required by Rule 9(1) of the Rules.

3. Default on Loan Repayment:
The corporate debtor defaulted on multiple loan agreements executed with IFCI Ltd. and Industrial Investment Bank of India (IIBI). Despite recall notices and subsequent legal actions, the corporate debtor failed to repay the outstanding amounts. The total amount in default as of 30.09.2018 was stated to be ?1,14,90,76,067.

4. Assignment of Debt and Substitution of Financial Creditor:
IFCI Ltd. assigned the debt to Kotak Mahindra Bank (KMB), which further assigned it to the petitioner. Similarly, IIBI assigned its debt to Yes Bank, which then assigned it to the petitioner. The petitioner was substituted as the applicant in the ongoing cases before the Debt Recovery Tribunals.

5. Issuance of Recovery Certificates by Debt Recovery Tribunals:
Debt Recovery Tribunals issued recovery certificates for the amounts due, including interest and liquidated damages. DRT-I issued a recovery certificate for ?5,07,76,772, and DRT-II issued a certificate for ?6,64,96,997.

6. Appointment and Role of the Interim Resolution Professional (IRP):
Mr. Arunava Sikdar was appointed as the IRP. His responsibilities include taking control and custody of the corporate debtor's assets, preparing an inventory of assets, and managing the affairs of the corporate debtor. The IRP is required to act in accordance with the Code, rules, and the Code of Conduct governing his profession. He must also cause a public announcement of the initiation of the CIRP within three days and constitute a committee of creditors.

7. Declaration of Moratorium:
A moratorium was declared under Section 14 of the Code, which includes:
- Suspension of suits or continuation of pending suits or proceedings against the corporate debtor.
- Prohibition on transferring, encumbering, or disposing of any assets of the corporate debtor.
- Suspension of any action to foreclose, recover, or enforce any security interest.
- Prohibition on the recovery of any property occupied by the corporate debtor.

The moratorium will remain effective until the completion of the CIRP or the approval of a resolution plan or liquidation order by the Tribunal.

Conclusion:
The petition was admitted, and the CIRP was initiated against the corporate debtor. Mr. Arunava Sikdar was appointed as the IRP, and a moratorium was declared. The corporate debtor and associated parties are directed to cooperate with the IRP in managing the affairs of the corporate debtor and accessing its books and records. The IRP is required to submit regular progress reports to the Tribunal.

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