2017 (10) TMI 911 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - default committed by corporate debtor - Held that - The default has been committed by the Corporate Debtor in making payment of the outstanding debt to the Financial Creditors/Applicants. The default committed by the Corporate Debtor is not denied. Thus, the Financial Creditor has fulfilled all the requirements of law and has also proposed the name of IRP after obtaining the written consent in Form-2. We are satisfied that Corporate Debtor has committed default in making payment of the outstanding debt to the Financial Creditors. Therefore, CP/551/(IB)/CB/2017 is admitted and we order the commencement of the Corporate Insolvency Resolution Process which ordinarily shall get completed within 180 days, reckoning from the day this order is passed. We appoint Mr. Venkataramanarao Nagarajan, as IRP as proposed by the Financial Creditors. There is no disciplinary proceedings pending against the IRP as evidenced from Form-2 and his name is reflected in IBBI website. The IRP is directed to take charge of the Respondent Corporate Debtor s management immediately. He is also directed to cause public announcement as prescribed under Section 15 of the I&B Code, 2016 within three days from the date the copy of this order is received, and call for submissions of claim in the manner as prescribed. We declare the moratorium which shall have effect from the date of this Order till the completion of corporate insolvency resolution process, for the purposes referred to in Section 14 of the I&B Code, 2016

Summary

Issues:
Adjudication of Application under Section 7 of the Insolvency and Bankruptcy Code 2016 against Corporate Debtor.

Analysis:
The Financial Creditors, Central Bank of India and State Bank of India, filed an Application under Section 7 of the Insolvency and Bankruptcy Code 2016 against the Corporate Debtor, M/s. Ashok Magnetics Ltd. The Application sought admission, initiation of Corporate Insolvency Resolution Process, declaration of Moratorium, and appointment of an Interim Resolution Professional (IRP). The Corporate Debtor contested the Application through Counsel and filed a counter. The outstanding debt due to the Financial Creditors was detailed in the Application, supported by relevant documents and statements of account.

The objections raised by the Corporate Debtor's Counsel were addressed by the Tribunal. The objections included issues regarding the service of notices, discrepancies in account statements, and alleged suppression of material facts. The Tribunal rejected these objections after considering the evidence and submissions made by both parties. It was established that the Financial Creditors had fulfilled all legal requirements, including proposing the name of the IRP with written consent in Form-2. The Tribunal found that the Corporate Debtor had indeed defaulted in payment to the Financial Creditors, leading to the admission of the Application.

The Tribunal admitted the Application, ordered the commencement of the Corporate Insolvency Resolution Process, and declared a moratorium. Mr. Venkataramanarao Nagarajan was appointed as the IRP, with directions to take charge of the Corporate Debtor's management promptly. The moratorium was to be effective from the date of the Order until the completion of the resolution process. Various prohibitions were imposed during the moratorium period, and essential supplies to the Corporate Debtor were to continue uninterrupted. The IRP was instructed to comply with specific sections of the Insolvency and Bankruptcy Code, and cooperation from the Corporate Debtor's directors and management was mandated.

The Tribunal directed the Financial Creditors and the Registry to provide a copy of the Order to the IRP for compliance and communication with all relevant parties. The Registry was tasked with disseminating the Order to the Financial Creditors and the Corporate Debtor for necessary action.