2022 (4) TMI 1000 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Corporate Applicant - existence of debt and dispute or not - HELD THAT - The Reply filed by the Respondent No. 4 is devoid of any substance and merit. The submissions made by the Respondent No. 4 are denied to the extent that they are contrary to and/or inconsistent with the averments and/or submissions made in this Rejoinder and the Application. The Corporate Applicant has filed the Insolvency Application in compliance with all the requirements under Section 10 of the Code, read with IBBI (Application to Adjudicating Authority) Rules, 2016. As per section 10(3) of the Code, the Corporate Applicant is required to comply with the following requirements, which have been duly complied. As long as the application is complete and in line with the Code, the application under section 10 should be allowed. Application admitted - moratorium declared.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency & Bankruptcy Code, 2016.
2. Financial distress and default by the Corporate Debtor.
3. Objections by the Financial Creditor (Punjab National Bank).
4. Appointment of Interim Resolution Professional (IRP).
5. Declaration of moratorium.

Detailed Analysis:

1. Initiation of CIRP under Section 10 of the Insolvency & Bankruptcy Code, 2016:
The Corporate Debtor, Byrnihat Coal Private Limited, filed an application under Section 10 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of CIRP against itself. The company, incorporated on March 4, 2005, and registered as an MSME, is in the business of coal, coke, and allied products.

2. Financial Distress and Default by the Corporate Debtor:
The Corporate Debtor detailed its financial distress, citing debts amounting to ?7,28,17,393.89 owed to various creditors, including Sharma & Sons Corporation, R.S.H Agro Products Limited, Naresh Kumar Harlalka, and Punjab National Bank (PNB). The company attributed its inability to repay these debts to the ban on coal mining by the Supreme Court and the National Green Tribunal, as well as the impact of COVID-19 lockdowns. The Corporate Debtor's accounts were declared Non-Performing Assets (NPA) by PNB, with the bank issuing a recall notice on April 13, 2021, demanding repayment of ?7,48,61,599.89.

3. Objections by the Financial Creditor (Punjab National Bank):
PNB opposed the application, arguing that the Corporate Debtor was attempting to escape its liabilities through the CIRP mechanism. PNB contended that mere default in repayment does not justify triggering the IBC provisions. The bank also highlighted potential conflicts of interest, noting that a key individual, Mr. Kamal Kumar Harlalka, was involved with both the Corporate Debtor and an operational creditor, R.S.H Agro Products Pvt. Ltd. PNB further argued that the pending recovery proceedings under the Recovery of Debts and Bankruptcy Act should take precedence over the CIRP application.

4. Appointment of Interim Resolution Professional (IRP):
The Corporate Debtor proposed Mr. Akhil Ahuja as the Interim Resolution Professional (IRP), with the necessary qualifications and written communication provided. The Tribunal appointed Mr. Ahuja as the IRP, directing him to make a public announcement of the moratorium and adhere to the provisions of the Insolvency and Bankruptcy Code.

5. Declaration of Moratorium:
The Tribunal declared a moratorium with immediate effect, prohibiting:
(a) Institution or continuation of suits or proceedings against the Corporate Debtor.
(b) Transferring or disposing of any assets by the Corporate Debtor.
(c) Foreclosure or enforcement of security interests.
(d) Recovery of property occupied by the Corporate Debtor.
The moratorium will remain in effect until the completion of the CIRP.

Conclusion:
The Tribunal admitted the application under Section 10 of the IBC, initiating CIRP against the Corporate Debtor, Byrnihat Coal Private Limited. The Tribunal rejected PNB's objections, citing legal precedents that support the initiation of CIRP despite pending recovery proceedings. The IRP was appointed, and a moratorium was declared to facilitate the resolution process. The Corporate Debtor's financial distress, default, and the need for a viable resolution plan were acknowledged, with the process commencing from the date of the order, April 1, 2022.

← Previous Next →