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2017 (11) TMI 164 - Tri - Insolvency and BankruptcyCorporate Insolvency resolution process - Held that - As objected by the corporate debtor that certification of the proposed Interim Resolution Professional (IRP) is not in conformity with the requirement of the Code and the application filed by the applicant bank is incomplete in this aspect. From the perusal of records, it is seen that the Applicant Bank and the proposed IRP were directed to take necessary steps to remove the defect and file proper certification vide order dated 08.09.2017. In compliance of the order dated 08.09.2017, an amended Form-2 has been duly filed by the Applicant Bank on 14.09.2017, which is on record. Hence, it is seen that the defect pointed out by the corporate debtor has since been cured. Under sub-section 5(a) of Section 7 of the Code, the application filed by Financial Creditor under Section 7 is admitted on satisfaction that I. Default has occurred, II. Application is complete, and III. No disciplinary proceeding against the proposed 1RP is pending. In the case in hand the respondent company has committed a default in repayment of the outstanding amount. Moreover, the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant financial creditor is entitled to claim its outstanding financial debt due to the corporate debtor and that there has been a default in payment of the financial debt. Therefore, in terms of Section 7(5)(a) of the Code, the present application is admitted. A moratorium in terms of section 14 of the Code is being issued.
Issues Involved:
1. Authorization to initiate corporate insolvency resolution process. 2. Existence of financial debt and default. 3. Admissibility of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. 4. Appointment of Interim Resolution Professional (IRP). 5. Issuance of moratorium under Section 14 of the Code. Issue-wise Detailed Analysis: 1. Authorization to initiate corporate insolvency resolution process: The respondent corporate debtor challenged the authorization of the representative of the applicant bank to initiate the corporate insolvency resolution process. The applicant bank provided a letter dated 12.04.2017 from the Chief Manager/AGM/DGM/GM seeking permission to initiate the process, and the head office's permission was conveyed on 17.04.2017. The specific authorization to Mr. O.P. Arora, Chief Manager, was given on 10.08.2017. The Tribunal found that the representative was duly authorized to file the application, and the objection raised by the respondent was not sustainable. 2. Existence of financial debt and default: The respondent argued that the debt claimed by the applicant bank was disputed and not due. The Tribunal noted that the loan was sanctioned, and the corporate debtor's account was declared NPA due to non-payment. The applicant provided a certified statement of accounts and a balance confirmation letter dated 25.03.2015. The Tribunal found sufficient evidence of financial debt and default, indicating the corporate debtor's failure to repay the loan amount. 3. Admissibility of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016: The Tribunal emphasized that it is not an adjudicating authority to ascertain the quantum of default but to record satisfaction of the occurrence of default. The pendency of SARFAESI proceedings and proceedings before the DRT does not preclude the initiation of insolvency proceedings under Section 7 of the Code. The Tribunal found that the default amount exceeded one lakh rupees, satisfying the criteria for initiating the corporate insolvency resolution process. 4. Appointment of Interim Resolution Professional (IRP): The respondent objected to the certification of the proposed IRP. The applicant bank and the proposed IRP were directed to rectify the defect, and an amended Form-2 was filed on 14.09.2017. The Tribunal found that the defect was cured. Mr. Mukesh Mohan, a registered insolvency professional with no pending disciplinary proceedings, was appointed as the IRP. 5. Issuance of moratorium under Section 14 of the Code: The Tribunal issued a moratorium prohibiting: - Institution or continuation of suits or proceedings against the corporate debtor. - Transferring, encumbering, or disposing of the corporate debtor's assets. - Actions to foreclose, recover, or enforce any security interest. - Recovery of any property occupied by the corporate debtor. The supply of essential goods or services to the corporate debtor shall not be terminated during the moratorium period. The moratorium will remain effective until the completion of the corporate insolvency resolution process. Conclusion: The Tribunal admitted the application under Section 7 of the Code, finding that the default had occurred, the application was complete, and no disciplinary proceedings were pending against the proposed IRP. The moratorium was issued, and Mr. Mukesh Mohan was appointed as the IRP to take statutory steps as per the Code. The IRP was directed to submit his report by 24.10.2017.
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