2017 (10) TMI 355 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Held that - In the case on hand, Respondent Company committed a default in repayment of the outstanding amount. The Application is complete in all respects. The material on record show that no disciplinary proceeding is pending against the proposed Interim Resolution Professional. This Application deserves to be admitted and it is accordingly admitted under Section 7 (5)(a) of the Code. This Adjudicating Authority hereby appoint Shri Ravi Kapoor, Company Secretary, as Interim Insolvency Resolution Professional residing at 7th Floor, 737, Fortune Tower, Sayajigunj, Vadodara-390005 and having Registration No. IBBI/IPA-002/IP-N00121/2017-18/10290 under Section 13 (1) (c) of the Code. The Interim Insolvency Resolution Professional is hereby directed to cause public announcement of the initiation of Corporate Insolvency Resolution Process and call for submission of claims under Section 13(l)(b) read with Section 15 of the Code and Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Moratorium under Section 13(1)(a) of the IB Code issued.

Summary

Issues:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against Corporate Guarantor.
2. Authority of the applicant to file the application.
3. Submission of entries in Bankers' Book.
4. Maintainability of the application due to other financial creditors.
5. Application against RBI guidelines.
6. Corporate Guarantor's liability.
7. Redundancy of Resolution Process due to ongoing process against Principal Borrower.
8. Validity of the registration of the proposed Interim Resolution Professional.
9. Nature of financial debt and liability of the Guarantor.
10. Default in repayment by the Respondent Company.
11. Compliance with requirements for Corporate Insolvency Resolution Process.

Analysis:
1. The applicant, IDBI Bank Limited, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the Respondent Company, a Corporate Guarantor, seeking to initiate the Corporate Insolvency Resolution Process. The Respondent Company had provided a Corporate Guarantee for financial assistance to the Principal Borrower, which was not repaid despite repeated reminders.

2. The objections raised regarding the authority of the applicant to file the application were dismissed, as the Deputy General Manager of the Applicant Bank was duly authorized to file the application as per the Delegation of Powers approved by the Board of Directors.

3. The objection related to the submission of entries in Bankers' Book was refuted as the applicant had provided copies of the Statement of Account of the Principal Borrower along with a Certificate issued under the Bankers' Books Evidence Act.

4. The objection concerning the presence of other financial creditors and the maintainability of the application was overruled, citing Section 7 of the Code, which allows a single financial creditor to file the application individually.

5. The objection based on RBI guidelines was rejected, emphasizing that the Circulars by RBI cannot override the provisions of the Code, and it is at the discretion of the Financial Creditor to initiate the Resolution Process.

6. The liability of the Corporate Guarantor was established as co-extensive with that of the Principal Borrower, making the Respondent Company liable for the unpaid amount as a Corporate Debtor.

7. The objection of redundancy due to an ongoing Resolution Process against the Principal Borrower was dismissed, as the Guarantor cannot avoid the Resolution Process when the loan remains unpaid.

8. The objection regarding the validity of the registration of the proposed Interim Resolution Professional was also rejected, as the provided Certificate showed the registration to be valid.

9. The nature of financial debt and the liability of the Guarantor were discussed, highlighting that the Respondent Company had a legal obligation to repay the loan amount borrowed by the Principal Borrower.

10. The default in repayment by the Respondent Company was established through evidence, justifying the admission of the application under Section 7(5)(a) of the Code.

11. The compliance with the requirements for the Corporate Insolvency Resolution Process was confirmed, leading to the appointment of an Interim Insolvency Resolution Professional and the initiation of the Corporate Insolvency Resolution Process.