2017 (12) TMI 239 - Tri - Insolvency and Bankruptcy

Corporate insolvency resolution process - Held that - The financial creditor has produced sufficient evidence of default which is rather not in dispute. The Interim Resolution Professional has been proposed and written communication in Form No.2 has already been furnished by the proposed Interim Resolution Professional and as already observed, the same is in order. Necessary declaration has been given in the application form by the authorised representative to the effect that to the best of his knowledge the proposed IRP is fully qualified and permitted to act as a Resolution Professional in accordance with the provisions of the Code read with Rules and Regulations framed thereunder. Sub-section (4) of Section 7 of the Code requires the adjudicating authority to ascertain the existence of a default from the records of information utility or on the basis of other evidences. There is no dispute about the fulfilment of the aforesaid requirement by the financial creditor. Apart from the statement of accounts maintained by the Bank, the CIBIL report (Annexure-80) has also been obtained by the Bank with regard to the default. In view of the aforesaid discussion, the default having occurred and the application being complete, the instant application deserves to be admitted. The petition is, therefore, admitted declaring the moratorium prohibiting all of the following as provided in section 14(1) of the Code

Summary

Issues Involved:
1. Authority to file the petition.
2. Grant and utilization of loans.
3. Default and outstanding amounts.
4. Applicability of RBI guidelines and MSME status.
5. Appointment of Interim Resolution Professional.
6. Admission of the petition and declaration of moratorium.

Issue-wise Detailed Analysis:

1. Authority to file the petition:
The petitioner, Punjab National Bank (PNB), filed the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, through Mr. Rajesh Sharma, Senior Manager, authorized by a Power of Attorney dated 27.02.2014 and further authority dated 02.08.2017. Compliance with the tribunal's direction was fulfilled by filing the letter dated 06.06.2017, authorizing the Assistant General Manager to initiate proceedings.

2. Grant and utilization of loans:
The respondent-corporate debtor applied for and was granted various credit facilities by PNB, including term loans and bank guarantees, supported by resolutions of its Board of Directors. The loans were secured by hypothecation of assets, mortgages, and guarantees. The corporate debtor executed multiple documents confirming these transactions and availed additional credit facilities over time.

3. Default and outstanding amounts:
The corporate debtor defaulted on the repayment of the loans. PNB issued demand notices and certified statements of accounts showing an outstanding amount of ?20,96,67,934 as of 28.08.2017. The corporate debtor had acknowledged the outstanding balances in its balance confirmation letters and financial statements for the years ending 31.03.2014, 31.03.2015, and 31.03.2016.

4. Applicability of RBI guidelines and MSME status:
The corporate debtor claimed protection under RBI guidelines for MSME rehabilitation, arguing that the financial creditor had a statutory duty to rehabilitate the account. However, the tribunal found that the loan was not sanctioned under the MSME scheme and thus, the protections claimed were not applicable. The tribunal noted that the corporate debtor's default was established, and the RBI guidelines did not preclude the initiation of insolvency proceedings.

5. Appointment of Interim Resolution Professional:
The financial creditor proposed Mr. Rajeev Khurana as the Interim Resolution Professional (IRP), who provided the necessary written communication and declaration of his ability to manage the case. The tribunal found the proposal and the IRP's qualifications to be in order.

6. Admission of the petition and declaration of moratorium:
The tribunal, satisfied with the evidence of default and the completeness of the application, admitted the petition and declared a moratorium under Section 14(1) of the Code. This moratorium prohibits the institution or continuation of suits, transferring or disposing of assets, enforcement of security interests, and recovery of property by owners or lessors. The tribunal also directed the continuation of essential goods or services to the corporate debtor during the moratorium period.

The matter was listed for the formal appointment of the Interim Resolution Professional on 10.11.2017, and copies of the order were directed to be communicated to both parties immediately.