2017 (10) TMI 571 - Tri - Insolvency and Bankruptcy

Winding up of the company for its inability to pay the debt - Held that - Since there is a default committed by the respondent as proved from the aforesaid discussion and the application being complete in all respect, the resolution professional has also been proposed, the instant petition deserves to be admitted. In view of the above, the instant petition is admitted and the moratorium is declared for prohibiting all of the following as provided in section 14(1) As directed that the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period. The provisions of sub-section (1) shall however not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. That the order of moratorium shall have effect from the date of this order till completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub- section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under Section 33 as the case may be. The matter is adjourned to 14.09.2017 for passing formal order to appoint Interim Resolution Professional with further directions.

Summary

Issues Involved:
1. Transfer of winding-up petition to the Tribunal.
2. Compliance with procedural requirements under the Insolvency and Bankruptcy Code (IBC), 2016.
3. Default and acknowledgment of debt by the Corporate Debtor.
4. Objections raised by the Corporate Debtor.
5. Bar of limitation.
6. Admission of the petition and declaration of moratorium.

Issue-wise Detailed Analysis:

1. Transfer of Winding-up Petition to the Tribunal:
The company petition was initially filed in the Hon'ble High Court of Punjab & Haryana under Sections 433(e) and 434 of the Companies Act, 1956 for winding up the company due to its inability to pay debt. Since the service of the respondent was not effected, the petition was transferred to the Tribunal under Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016.

2. Compliance with Procedural Requirements under IBC, 2016:
The petitioner filed an application as a "Financial Creditor" in Form No.1 under Section 7 of the Insolvency and Bankruptcy Code, 2016. The petitioner complied with the requirement of submitting the necessary information and proposing an Interim Resolution Professional (IRP). The application was considered complete under Section 7 of the Code.

3. Default and Acknowledgment of Debt by the Corporate Debtor:
The petitioner provided evidence of a ?10,00,000 advance given to the Corporate Debtor on 10.11.2012, which was acknowledged in the balance sheet dated 05.12.2013. The respondent's objections included a Memorandum of Understanding (MOU) and a share purchase agreement, which allegedly settled all liabilities. However, the Tribunal found no evidence of the petitioner's debt being paid, and the balance sheet acknowledgment was deemed valid.

4. Objections Raised by the Corporate Debtor:
The respondent argued that the liabilities were settled as per the MOU and share purchase agreement, and the petition was barred by limitation. However, the Tribunal noted that the petitioner was neither a shareholder nor a party to these agreements and found no proof of payment of the petitioner's debt. The acknowledgment in the balance sheet was considered valid, and the petitioner's status as a "Financial Creditor" was upheld.

5. Bar of Limitation:
The respondent contended that the petition was barred by limitation. However, the Tribunal referred to the National Company Law Appellate Tribunal's decision in "Neelkanth Township and Construction (P.) Ltd. v. Urban Infrastructure Trustees Limited," which held that the limitation law does not apply to the IBC, 2016. The Tribunal found the petition filed in November 2016 to be within the limitation period due to the acknowledgment in the balance sheet dated 05.12.2013.

6. Admission of the Petition and Declaration of Moratorium:
The Tribunal found that a default had occurred, the application was complete, and there were no disciplinary proceedings against the proposed resolution professional. Consequently, the petition was admitted, and a moratorium was declared under Section 14(1) of the Code, prohibiting various actions against the Corporate Debtor. The supply of essential goods or services to the Corporate Debtor was directed to continue during the moratorium period.

Conclusion:
The Tribunal admitted the petition and declared a moratorium, directing that the supply of essential goods or services to the Corporate Debtor should not be terminated or suspended. The matter was adjourned for the formal appointment of the Interim Resolution Professional.