2018 (9) TMI 121 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - default in repayment of the outstanding amount - default in payment of the financial debt - Held that - In the case in hand the respondent company has committed default in repayment of the outstanding amount. In reply respondent company has not raised objection against admission of the present application filed by the financial creditor. That apart the present 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 from the corporate debtor and that there has been clear default in payment of the financial debt. As a sequel to the above discussion and in terms of Section 7 (5) (a) of the Code, the present application is admitted.

Summary

Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Territorial jurisdiction of the Tribunal.
3. Authorization of the applicant’s representative.
4. Appointment of Interim Resolution Professional (IRP).
5. Financial debt and default by the corporate debtor.
6. Admission of the application and commencement of the Corporate Insolvency Resolution Process (CIRP).
7. Declaration of moratorium.

Issue-wise Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Oriental Bank of Commerce, claiming to be the financial creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s Pellet Energy Systems Private Limited, the corporate debtor.

2. Territorial jurisdiction of the Tribunal:
The corporate debtor, M/s Pellet Energy Systems Private Limited, has its registered office in New Delhi. Therefore, the National Company Law Tribunal, New Delhi, has territorial jurisdiction over the matter under sub-section (1) of Section 60 of the Code.

3. Authorization of the applicant’s representative:
Mr. Sunil Kumar Yadav, Assistant General Manager of the applicant bank, was authorized via a General Power of Attorney dated 04.09.2003 to act on behalf of the bank. This authorization enabled him to sign and file the application for initiating the CIRP under the Code.

4. Appointment of Interim Resolution Professional (IRP):
The applicant proposed Ms. Reshma Mittal as the Interim Resolution Professional (IRP), and her name was supported by the necessary declarations and disclosures as per the IBBI Regulations. She satisfied the requirements of Section 7(3)(b) of the Code for her appointment.

5. Financial debt and default by the corporate debtor:
The financial debt details included a Term Loan of ?22.50 crores and a Cash Credit (Hypothecation) of ?6 crores sanctioned on 29.11.2013. The corporate debtor executed various security and loan documents, hypothecating its assets. The debtor failed to maintain financial discipline, leading to its account being declared as a Non-Performing Asset (NPA) on 31.08.2016. The applicant recalled the loan via a notice under Section 13(2) of the SARFAESI Act, 2002, but the debtor failed to repay the amount due, which was ?35,42,44,818/- as of 31.12.2017.

6. Admission of the application and commencement of the CIRP:
The financial creditor provided voluminous evidence, including loan agreements, hypothecation agreements, guarantee agreements, and certified bank statements, proving the financial debt and default. The corporate debtor, through an authorized director, submitted an affidavit stating no objection to the admission of the petition for the commencement of CIRP. The Tribunal, satisfied with the evidence and the completeness of the application, admitted the application under Section 7(5)(a) of the Code.

7. Declaration of moratorium:
The Tribunal declared a moratorium under Section 14 of the Code, imposing prohibitions on:
- 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 created by the corporate debtor.
- Recovery of any property by an owner or lessor where such property is occupied by the corporate debtor.

The moratorium does not apply to transactions notified by the Central Government or the supply of essential goods or services to the corporate debtor. The IRP was directed to make a public announcement and perform functions as per Sections 15, 17, 18, 19, 20, and 21 of the Code, with all personnel connected to the corporate debtor required to cooperate with the IRP.

The Tribunal ordered the office to communicate the order to the financial creditor, corporate debtor, and IRP within seven days.