2017 (7) TMI 926 - Tri - Insolvency and Bankruptcy

Initiation of insolvency process - Insolvency and Bankruptcy Code 2016 - Held that - Insolvency process deserves to be initiated as the requirements of Section 10 of the Code and Rules framed thereunder have been fulfilled. A perusal of section 10 would show that a corporate debtor may file such application for initiating the insolvency resolution process where it has committed a default. It is required to furnish information relating to its books of account and the documents relating to the period as may be specified. A perusal of the paper book would show that books of account and other attendant documents have been filed and an Interim Resolution Professional has also been proposed. The petitioner itself has admitted default. Accordingly, we hold that the Petition merits admission and the same is accordingly admitted. Keeping in view the object of the Code namely to get rid of NPA accounts and allow the dead investment to come into circulation. We were in fact disposed to the view of refusing Moratorium in the present case for the above reasons but have not taken that extreme view. However, the resolution in the present case must conclude within 180 days. No further time would be warranted unless creditors decide otherwise. The Interim Resolution Professional shall perform all other duties cast upon him in accordance with the provisions of the code like making of public announcement, taking over the affairs of the management of the corporate debtors and many other duties as per the Code. The operational creditors in IB No.20(PB)/2017 may file its claims before the Insolvency Resolution Professional in accordance with the public notice to be issued like all other claimants. As a sequel to the above discussion is admitted and is disposed of as such. However, IB No.20(PB)/2017 is dismissed with the observation that operational creditor therein may file its claim before the Insolvency Resolution Professional, as per the public notice which is likely to be issued.

Summary

Issues involved:
1. Initiation of insolvency process by an operational creditor against a corporate debtor.
2. Filing of a petition by the corporate debtor itself under Section 10 of the Insolvency and Bankruptcy Code.

Detailed Analysis:
Issue 1:
In the first petition, an operational creditor, M/s. Incredible Unique Buildcon Pvt. Limited, sought the initiation of insolvency proceedings against the corporate debtor, M/s. Clutch Auto Limited, under Section 9 of the Insolvency and Bankruptcy Code. Simultaneously, in the second petition filed under Section 10 of the Code, M/s. Clutch Auto Limited requested to initiate insolvency proceedings against itself. The second petition was filed before the first petition, indicating the corporate debtor's proactive approach towards resolving its financial issues.

Issue 2:
M/s. Clutch Auto Limited approached the Tribunal under Section 10 of the Code, stating that it was incorporated as a private limited company and later converted into a public limited company. The petition detailed the authorized and paid-up capital of the corporate debtor, along with the appointment of an Interim Resolution Professional. The petition included a list of financial and operational creditors, demonstrating default for over three years. Various financial documents, including audited statements, details of assets and liabilities, and guarantees related to debts, were submitted. The Tribunal, after hearing both parties, concluded that the insolvency process should be initiated as per the requirements of Section 10 of the Code. The admission of the petition triggered a moratorium under Section 14, prohibiting certain actions against the corporate debtor.

The Tribunal emphasized the importance of timely resolution, considering the corporate debtor's previous moratorium due to a reference with the BIFR. Despite contemplating a refusal of moratorium, the Tribunal decided to admit the petition, emphasizing the need for a swift resolution within 180 days. The Interim Resolution Professional was tasked with various responsibilities, including making public announcements and managing the affairs of the corporate debtor in line with the Code's provisions.

In conclusion, the Tribunal admitted the petition filed by the corporate debtor under Section 10, while dismissing the operational creditor's petition under Section 9. The operational creditor was directed to file its claims before the Insolvency Resolution Professional. Both petitions were disposed of accordingly, with a clear directive for further proceedings.