2018 (3) TMI 903 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - Held that - The Insolvency and Bankruptcy Code, 2016 is a complete Code in itself. The provisions of the Code are to be mandatorily followed. Tribunal cannot exercise the power as enshrined in Article 142 of the Constitution of India. Adherence to the statutory requirements has to be in toto. Section 10 (4) (a) of the Code mandates the Adjudicating Authority to admit the application if it is complete. When the language of the Code is clear and explicit the Adjudicating Authority must give effect to it, whatever may be the consequences. The stand of Canara Bank that the applicant has not come with clean hands and has suppressed facts, cannot be a ground to reject the application if it is otherwise complete. Also it is no longer res integra that pendency of a suit or court proceedings is no bar for initiation of insolvency proceedings under the Code. In view of the overriding effect given by the provisions of Section 238 of the Code, the initiation and pendency of proceedings before DRT is no bar for initiation of resolution and insolvency proceedings under the Code. Hence, the objections raised by the financial creditor cannot sustain. The present application is complete and that the applicant corporate debtor has committed a default. Therefore, as the application is complete the present application is admitted under section 10 (4) (a) of the Code. The corporate insolvency resolution process shall commence from the date of this order under sub-section 5 of Section 10 of the Code.

Issues Involved:
1. Jurisdiction and Admissibility of Application under Section 10 of the Insolvency and Bankruptcy Code, 2016.
2. Compliance with Statutory Requirements under the Insolvency and Bankruptcy Code, 2016.
3. Objections Raised by the Financial Creditor (Canara Bank).
4. Appointment of Interim Resolution Professional (IRP).
5. Issuance of Moratorium.

Issue-wise Detailed Analysis:

1. Jurisdiction and Admissibility of Application under Section 10 of the Insolvency and Bankruptcy Code, 2016:
The application was filed under Section 10 of the Insolvency and Bankruptcy Code, 2016 (the 'Code') by M/s. Miditech Private Limited, incorporated on 31.07.1997 under the Companies Act, 1956. The Tribunal confirmed its territorial jurisdiction as the registered office of the applicant company is in Delhi. The application was filed by Mr. Nikhil Alva, director and authorised representative of the applicant company, as per the board resolution dated 20th September 2017.

2. Compliance with Statutory Requirements under the Insolvency and Bankruptcy Code, 2016:
The Tribunal noted that under Section 10 of the Code, a Corporate Applicant can file an application for initiation of Corporate Insolvency Resolution Process (CIRP) on account of default in payment. The applicant company had availed various credit facilities from Canara Bank and Jupiter Capital Private Limited but defaulted due to economic slowdown and other uncontrollable factors. The default amount was significantly more than the minimum threshold of one lakh rupees. The applicant affirmed via affidavit dated 24.11.2017 that it was not disqualified under Section 11 of the Code, and no prior CIRP or liquidation order existed against it. The application included audited financial statements for the last two financial years and a provisional financial statement for the current financial year, fulfilling Section 10 (3) (a) requirements. The proposed IRP, Mr. Gian Chand Narang, was confirmed to be a registered and qualified Insolvency Professional with no pending disciplinary actions against him, complying with Section 10 (3) (b).

3. Objections Raised by the Financial Creditor (Canara Bank):
Canara Bank contended that the applicant approached the Tribunal with unclean hands, alleging diversion of loan amounts to related companies. The applicant refuted these claims, stating that no new loans were granted in 2016 and the amounts reflected were closing balances carried forward over the years. The Tribunal acknowledged that the creditor bank could initiate appropriate legal actions but emphasized that the Code mandates adherence to statutory requirements. The Tribunal cited precedents from Hon’ble NCLAT cases, asserting that non-disclosure of unrelated facts cannot be grounds for rejecting the application if it is otherwise complete. The Tribunal also dismissed the objection regarding the applicant's intention to defeat pending DRT proceedings, citing Section 238 of the Code, which gives overriding effect to the initiation of insolvency proceedings.

4. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Gian Chand Narang as the Interim Resolution Professional (IRP) and directed him to take statutory steps under Sections 15, 17, and 18 of the Code. The IRP was instructed to submit his report within 30 days from the date of appointment, not later than 16.03.2018.

5. Issuance of Moratorium:
A moratorium was issued under Section 14 of the Code, prohibiting:
- Institution or continuation of suits or proceedings against the corporate debtor.
- Transferring, encumbering, alienating, or disposing of any assets of the corporate debtor.
- Actions to foreclose, recover, or enforce any security interest.
- Recovery of property by an owner or lessor.
The Tribunal also directed that the supply of essential goods or services to the corporate debtor should not be terminated during the moratorium period. The moratorium would be effective from the date of the order until the completion of the CIRP.

Conclusion:
The Tribunal admitted the application under Section 10 (4) (a) of the Code, initiating the Corporate Insolvency Resolution Process for the applicant company. The order included the issuance of a moratorium and the appointment of an Interim Resolution Professional, with directions to comply with statutory requirements and submit necessary reports within the stipulated timeframe.

← Previous Next →