2017 (11) TMI 1273 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - whether the petitioner has been able to satisfy the requirement of Section 7 of the Code? - Held that - From the perusal of the record, we are satisfied that the Financial Creditor has proved by overwhelming evidence that default has occurred, which meets the requirement of Section 3(11) and (12) read with Section 7(3)(a) and Section 7 (5) of the Code. A copy of CRILC Report (Annexure-FC33), a copy of Banker s Book as per Banker s Evidence Act, 1891 (Annexure- FC30), various letters issued by Financial Creditor including the one declaring the account as NPA show overwhelmingly the default committed by the Corporate Debtor . We further find that the application is complete in all other respects as the Insolvency Professional, Mr. Mukesh Mohan has been duly proposed and he has also made full declaration stating that no disciplinary proceedings are pending against him. The other objection by referring to the provisions of SICA and SARFAESI would also not detain us from admission of the petition because Section 238 of the Code contained a non-obstante clause in the widest terms possible. The parliament in its wisdom is presume to have knowledge of the provision of various statues prevailing earlier to the enforcement of the Code. Thus this petition is admitted. Shri Mukesh Mohan who is duly registered with Insolvency and Bankruptcy Board of India IBBI/IPA-001/IP-P00018/2016- 17/10042) has been proposed as an Interim Resolution Professional. He is hereby appointed as an Interim Resolution Professional. He has filed his certificate of registration with Insolvency and Bankruptcy Board of India. He has also filed his written communication dated 23.08.2017 in connection with the application to initiate Corporate Insolvency Resolution Process. The disclosure has been made in the letter dated 23.08.2017. No disciplinary proceedings are pending against him.

Summary

Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Default in payment by the Corporate Debtor.
3. Competence of a single financial creditor to file the application.
4. Classification of the Corporate Debtor's account as Non-Performing Asset.
5. Objections raised by the Corporate Debtor regarding consortium finance.
6. Objections regarding the classification of the account as NPA and reference to BIFR under SICA.
7. Appointment of Interim Resolution Professional and declaration of moratorium.

Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The ICICI Bank Limited, referred to as the 'Financial Creditor,' filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the Insolvency Resolution Process against M/s. Tirupati Inks Ltd., the 'Corporate Debtor.' The application was authorized by a power of attorney dated 05.11.2014.

2. Default in payment by the Corporate Debtor:
The Financial Creditor provided detailed information on the financial debt granted to the Corporate Debtor, including dates of disbursement and subsequent defaults. The Corporate Debtor defaulted on payments not only to the Financial Creditor but also to other consortium members led by Punjab National Bank. The account was classified as a Non-Performing Asset on 30.06.2016, and the Financial Creditor recalled the facilities, invoking personal and corporate guarantees.

3. Competence of a single financial creditor to file the application:
The Corporate Debtor argued that the Financial Creditor, being part of a consortium, could not individually enforce rights without the consent of other consortium members. However, the tribunal dismissed this objection, citing the explanation to Section 7(1) and Rule 4 of the Insolvency and Bankruptcy (Adjudicating Authority) Rules, 2016, which allow a financial creditor to file an application either individually or jointly.

4. Classification of the Corporate Debtor's account as Non-Performing Asset:
The Corporate Debtor contended that the classification of its account as NPA was in violation of RBI guidelines and the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The tribunal found overwhelming evidence of default, including CRILC and CIBIL reports, and various letters issued by the Financial Creditor declaring the account as NPA.

5. Objections raised by the Corporate Debtor regarding consortium finance:
The Corporate Debtor argued that the lack of support from the consortium of bankers led to its financial difficulties. It also mentioned that the Joint Lender meetings held to discuss issues did not yield substantial resolutions. The tribunal noted that the possibility of any viable plan was within the domain of the consortium banks and not relevant for the purpose of admitting the petition.

6. Objections regarding the classification of the account as NPA and reference to BIFR under SICA:
The Corporate Debtor claimed that its accumulated losses and eroded net worth made it a sick industrial company under SICA, and it had made a reference to BIFR. The tribunal dismissed this objection, citing Section 238 of the Code, which contains a non-obstante clause that overrides other laws.

7. Appointment of Interim Resolution Professional and declaration of moratorium:
The tribunal appointed Shri Mukesh Mohan as the Interim Resolution Professional, finding that he met all requirements and no disciplinary proceedings were pending against him. A public announcement was directed, and a moratorium was declared under Section 14 of the Code, prohibiting suits, asset transfers, foreclosure actions, and recovery of property by owners or lessors.

Conclusion:
The petition was admitted, and the tribunal directed the Interim Resolution Professional to perform all functions as per the Code. The tribunal emphasized the legal obligation of the Corporate Debtor's personnel to assist the Interim Resolution Professional and protect the value of the Corporate Debtor's property. The office was directed to communicate the order to the Financial Creditor and the Corporate Debtor within seven days.