2020 (9) TMI 398 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and default or not - HELD THAT - As per Section 10 of Insolvency and Bankruptcy Code, 2016, a Corporate Applicant can file an application before the Adjudicating Authority, seeking initiation of Corporate Insolvency Resolution Process of the Corporate Debtor that has committed a default, for initiating Corporate Insolvency Resolution Process with the Adjudicating Authority, in a prescribed form - As per Section 10(4) the Adjudicating Authority can admit an application if the same is complete and no disciplinary proceedings are pending against the proposed Resolution Professional. It is a settled position of law that once debt and default is proved to the satisfaction of the Adjudicating Authority, the case has to be admitted to initiate CIRP, and appoint IRP etc. We are satisfied with the reasons cited by the Petitioner to initiate CIRP. The instant Company Petition is filed in accordance with law. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Default by the Corporate Applicant.
3. Appointment of Interim Resolution Professional (IRP).
4. Declaration of Moratorium.
5. Compliance with the provisions of the IBC, 2016.

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency and Bankruptcy Code (IBC), 2016:
The petition was filed by the Director of M/s. Blue Whale Machinery Technologies Pvt. Ltd. under Section 10 of the IBC, 2016, read with Rule 7 of the I&B (Application to Adjudicating Authority) Rules, 2016. The petitioner sought to initiate CIRP on the grounds of default amounting to ?18,01,59,144, which includes ?11,23,40,812 owed to Financial Creditors and ?6,78,18,332 to Operational Creditors.

2. Default by the Corporate Applicant:
The company was incorporated on 19.11.2007 and was running well until the financial year ending 31.03.2017. However, due to market variations and other unavoidable reasons, the company started incurring losses and was unable to repay its debts. The company received a Demand Notice under the SARFAESI Act from Karur Vysya Bank Limited on 31.12.2019, demanding ?6.49 Crore. The financial statements and statement of affairs filed with the petition showed significant debts and defaults.

3. Appointment of Interim Resolution Professional (IRP):
The petitioner suggested Mr. Srinivas Thatikonda as the IRP, who provided his written consent and declared that he is eligible and there are no disciplinary proceedings pending against him. The tribunal appointed Mr. Srinivas Thatikonda as the IRP to carry out the CIRP as per the provisions of the IBC, 2016.

4. Declaration of Moratorium:
The tribunal declared a moratorium prohibiting:
a. Institution or continuation of suits or proceedings against the Corporate Applicant.
b. Transferring, encumbering, or disposing of any assets or legal rights.
c. Actions to foreclose or enforce any security interest.
d. Recovery of property by an owner or lessor.
e. Termination or suspension of essential goods or services to the Corporate Debtor.
The moratorium would be effective from the date of the order until the completion of the CIRP, except for cases pending before the Hon'ble High Court and Supreme Court.

5. Compliance with the Provisions of the IBC, 2016:
The tribunal found that the petition met the requirements of Section 10 of the IBC, 2016. The petition was complete, and no disciplinary proceedings were pending against the proposed IRP. The tribunal emphasized that once debt and default are proved, the case must be admitted to initiate CIRP. The Board of Directors and staff of the Corporate Applicant were directed to cooperate fully with the IRP. The IRP was instructed to follow all extant provisions of the IBC, 2016, and to file progress reports with the tribunal.

Conclusion:
The tribunal admitted the petition for initiating CIRP against M/s. Blue Whale Machinery Technologies Pvt. Ltd. and appointed Mr. Srinivas Thatikonda as the IRP. A moratorium was declared, and the tribunal directed compliance with all provisions of the IBC, 2016. The case was posted for the IRP's report on 19th August 2020.