2022 (6) TMI 1221 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - It can be seen from the records of the proceedings placed, that since the Corporate Debtor's account has been classified as fraudulent transaction by the banker and the Corporate Debtor is unable to infuse more funds and submit better proposal for OTS. However, CIRP to be initiated on the Corporate Debtor and it is proved that there is a debt and default on the part of the Corporate Debtor. In view of the 'financial debt' which is proved by the Financial Creditor and the 'default' being committed on the part of the Corporate Debtor, this Tribunal is left with no other option than to proceed with the present case and initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor - Application admitted - moratorium declared.

Issues Involved:
1. Condonation of delay in filing the counter.
2. Admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
3. Declaration of moratorium and appointment of Interim Resolution Professional (IRP).
4. Classification of the Corporate Debtor's account as fraudulent.
5. Initiation of Corporate Insolvency Resolution Process (CIRP).

Detailed Analysis:

1. Condonation of Delay in Filing the Counter:
IA/1186(CHE)/2021 was filed by the Respondent seeking a condonation of delay of 14 days in filing the counter. The tribunal condoned the delay and took the counter on record, thereby allowing IA/1186(CHE)/2021.

2. Admission of the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The application CP(IB)/203(CHE)/2021 was filed by the Financial Creditor, Indian Overseas Bank, under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor, Rosvar Steels Private Limited. The tribunal noted that the Financial Creditor is a bank and provided the registered office address. The Corporate Debtor is a private limited company incorporated on 29.06.1995. The Financial Creditor proposed the name of Mrs. M. Jayasree as the Interim Resolution Professional (IRP).

3. Declaration of Moratorium and Appointment of Interim Resolution Professional (IRP):
The tribunal found that the Financial Creditor claimed a sum of Rs. 31,17,20,210.16 as on 19.08.2021, with the date of default mentioned as 31.10.2018. The tribunal, after hearing submissions from both parties, concluded that the debt and default had been proven beyond reasonable doubt. Consequently, the tribunal initiated the Corporate Insolvency Resolution Process (CIRP) and declared a moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016. The IRP, Mrs. M. Jayasree, was directed to take charge of the Corporate Debtor's management immediately and to make a public announcement within three days.

4. Classification of the Corporate Debtor's Account as Fraudulent:
The Corporate Debtor argued that its account was classified as fraudulent by the Financial Creditor, leading to an FIR by the CBI. The Corporate Debtor contended that no diversion of funds or fraudulent acts had been identified by the CBI. The Respondent had filed a writ petition for the removal of the fraudulent classification. Despite these arguments, the tribunal noted that the classification as fraudulent hindered the Corporate Debtor's ability to propose a One Time Settlement (OTS).

5. Initiation of Corporate Insolvency Resolution Process (CIRP):
The tribunal referred to the Supreme Court case of Innoventive Industries Limited v. ICICI Bank Limited, emphasizing that the adjudicating authority's role under Section 7 of the IBC is limited to assessing whether a default has occurred based on the records provided by the financial creditor. The tribunal found that the financial debt and default were proven and thus proceeded with the CIRP. The moratorium was declared, and the IRP was directed to comply with the relevant sections of the IBC, 2016. The IRP was also instructed to file the first progress report before the tribunal on or before the 45th day of the initiation of CIRP.

Conclusion:
The application was admitted under Section 7 of the IBC, 2016, and the moratorium was declared. The IRP was appointed, and the tribunal directed the IRP to take necessary steps as per the IBC, 2016. The tribunal also scheduled a subsequent hearing for 04.08.2022.

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