2019 (10) TMI 502 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - outstanding debt - Non-performing asset - it was alleged that the Corporate Debtor failed and neglected to repay the facilities - HELD THAT - The Financial Creditor has been able to prove on the basis of documentary evidence placed on record that the credit facilities/debt was duly disbursed to the Corporate Debtor which was later on assigned to the present Applicant M/s. Edelweiss Asset Reconstruction Co. Limited by way of Assignment Agreement dated 26th March, 2014. Along with the assignment, the present Applicant entered into the shoes of Bank of Baroda, the assignor and all the documents of security, securing the loan/credit facilities availed by the Corporate Debtor were handed over to the Financial Creditor which are sufficient to proceed against the Corporate Debtor and admit the present application for initiation of Corporate Insolvency Resolution Process. The Financial Creditor has been able to prove the default having taken place in payment of the outstanding debt, as on 31st March, 2018 on which date the account of the Corporate Debtor was declared as an NPA. The application is complete in all respects, and the Financial Creditor has proved the existence of financial debt owed by the Corporate Debtor to the Financial Creditor, the default having been occurred in payment of the financial debt, we have no other option but to admit the application - Application admitted - moratorium declared.

Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Classification of the Corporate Debtor's account as Non-Performing Asset (NPA).
3. Assignment of debt by Bank of Baroda to the Financial Creditor.
4. Allegation of debt being barred by limitation.
5. Allegation of forum shopping and multiple proceedings.
6. Viability of the Corporate Debtor as a commercial undertaking.
7. Appointment of Interim Resolution Professional (IRP).

Issue-wise Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016:
The application was filed by M/s. Edelweiss Asset Reconstruction Co. Ltd. (Financial Creditor) against Gena Pharmaceuticals Limited (Corporate Debtor) under Section 7 of the IBC, 2016. The Financial Creditor sought to initiate Corporate Insolvency Resolution Process (CIRP) due to the Corporate Debtor's failure to repay credit facilities availed from Bank of Baroda, which were later assigned to the Financial Creditor.

2. Classification of the Corporate Debtor's account as Non-Performing Asset (NPA):
The Corporate Debtor's account was classified as NPA by Bank of Baroda on 31st March, 2010, after failing to adhere to the terms and conditions of the restructured credit facilities. A notice was issued on 1st October, 2010, demanding repayment of ?15,80,50,017.21 along with additional contingent liabilities.

3. Assignment of debt by Bank of Baroda to the Financial Creditor:
Bank of Baroda assigned its debt to the Financial Creditor via an Assignment Agreement dated 26th February, 2014. The Financial Creditor acquired all rights, title, and interest in relation to the debt and stepped into the shoes of Bank of Baroda, thus becoming entitled to initiate necessary proceedings against the Corporate Debtor.

4. Allegation of debt being barred by limitation:
The Corporate Debtor argued that the debt was barred by limitation as the account was classified as NPA on 31st March, 2010, and the application was filed on 26th April, 2017. The Financial Creditor countered that the Balance Sheet of the Corporate Debtor as on 31st March, 2017, disclosed and admitted a demand of approximately ?25 crores, thus the application was within the limitation period. The Tribunal referenced the Supreme Court's ruling in B.K. Educational Services (P.) Ltd. Vs. Parag Gupta & Associates, which held that where the cause of action is continuing, an application under Section 7 is not barred by limitation.

5. Allegation of forum shopping and multiple proceedings:
The Corporate Debtor accused the Financial Creditor of forum shopping and engaging in multiple proceedings to harass and coerce payment of an unjust claim. The Financial Creditor denied these allegations, asserting that the proceedings were legitimate and based on clear admissions of default in the Corporate Debtor's Balance Sheet.

6. Viability of the Corporate Debtor as a commercial undertaking:
The Corporate Debtor claimed to be a viable commercial entity employing around 70 people and engaged in manufacturing life-saving drugs. They argued that admitting the application would cause irreparable loss and injury. The Tribunal, however, found that the Financial Creditor had proven the default and the debt owed by the Corporate Debtor.

7. Appointment of Interim Resolution Professional (IRP):
The Financial Creditor proposed Mr. Anup Kumar Singh as the IRP, who confirmed his eligibility and willingness to act in this capacity. The Tribunal appointed Mr. Singh as the IRP to oversee the CIRP and directed the Corporate Debtor to deposit ?5,00,000 in an ESCROW account for preliminary expenses.

Conclusion:
The Tribunal admitted the application under Section 7 of the IBC, 2016, and declared a moratorium in accordance with Sections 13 and 15 of the IBC, 2016. The moratorium prohibits the institution or continuation of suits, transfer of assets, foreclosure actions, and recovery of property. The IRP was directed to make a public announcement and convene a meeting of the Committee of Creditors to submit a resolution plan within 105 days. The Tribunal scheduled the next hearing for the filing of the progress report on 17th September, 2019.

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