2018 (9) TMI 1531 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - submission of application in manner prescribed - Held that - Form and manner of the application has to be the one as prescribed. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of IBC. We are satisfied that a default has occurred and the application under sub-section 2 of Section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. Thus, the application warrants admission. As a sequel to the above discussion, this petition is admitted and Mr. Akhil Goel, F-224-A, Laxmi Nagar, New Delhi-110092, Registration No. IBBI/IPA-001/IP-P00666/2017-18/11134 is appointed as an Interim Resolution Professional.

Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Admission of default by the Corporate Debtor.
3. Objections raised by the Corporate Debtor.
4. Financial constraints and restructuring efforts by the Corporate Debtor.
5. Additional affidavit and claims by operational creditors.
6. Compliance with Section 7 of the Insolvency and Bankruptcy Code, 2016.
7. Appointment of Interim Resolution Professional.
8. Declaration of moratorium under Section 14 of the Code.
9. Duties and responsibilities of the Interim Resolution Professional.

Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The ‘Financial Creditor’ filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Moods Hospitality Private Limited.

2. Admission of default by the Corporate Debtor:
The Corporate Debtor admitted to receiving an unsecured loan of ?3,50,00,000 from the Financial Creditor, which was due for repayment by 25.07.2017. The Corporate Debtor also acknowledged restructuring the loan and creating a first charge over its movable properties in favor of the Financial Creditor.

3. Objections raised by the Corporate Debtor:
The Corporate Debtor opposed the petition, citing immense financial constraints and efforts to reconcile and resolve the issues. However, the Tribunal noted that mere expression of good intentions without a substantial proposal would not suffice. The Tribunal emphasized that the Financial Creditor could not be compelled to accept a proposal based on uncertain terms.

4. Financial constraints and restructuring efforts by the Corporate Debtor:
The Corporate Debtor argued that initiating the CIRP would result in loss of livelihood for people associated with the company and erode its brand value. The Tribunal dismissed this objection, stating that substantial outstanding amounts were still payable, and any proposal should be examined by the Committee of Creditors after admission of the petition.

5. Additional affidavit and claims by operational creditors:
An additional affidavit was filed by an operational creditor, claiming that the Financial Creditor filed the petition in connivance with the Corporate Debtor. The Tribunal noted that the Corporate Debtor had assured cooperation and care of the operational creditor's interests, and thus, no further adjudication was required on this matter.

6. Compliance with Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal examined the provisions of Section 7(2) and Section 7(5) of the Code and found that the application was complete in all respects. The Tribunal was satisfied that a default had occurred, the application was complete, and no disciplinary proceedings were pending against the proposed Interim Resolution Professional.

7. Appointment of Interim Resolution Professional:
The Tribunal appointed Mr. Akhil Goel as the Interim Resolution Professional (IRP) and directed him to make a public announcement regarding the admission of the application within three days.

8. Declaration of moratorium under Section 14 of the Code:
The Tribunal declared a moratorium under Section 14 of the Code, prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of assets, and recovery of property by owners or lessors. The moratorium would not apply to transactions notified by the Central Government or the supply of essential goods or services.

9. Duties and responsibilities of the Interim Resolution Professional:
The IRP was directed to perform his functions as per Sections 15, 17, 18, 19, 20, and 21 of the Code, with utmost integrity and honesty. The Tribunal emphasized the legal obligation of all personnel connected with the Corporate Debtor to assist and cooperate with the IRP. The IRP was also tasked with protecting and preserving the value of the Corporate Debtor's property.

Conclusion:
The Tribunal admitted the petition, appointed Mr. Akhil Goel as the IRP, declared a moratorium, and outlined the duties and responsibilities of the IRP. The office was directed to communicate the order to the Financial Creditor, Corporate Debtor, and IRP within seven days. The operational creditor was allowed to file its claim before the IRP, to be disposed of in accordance with the law.

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