2018 (10) TMI 47 - Tri - Insolvency and Bankruptcy

Insolvency Resolution Process - outstanding debt - Held that - A record of default is available with the Credit Information Bureau (India) Limited (CIBIL) as per its commercial credit information report of the Corporate applicant based on report dated 07.02.2018 (at pgs. 208-256). Certificate of registration of charge issued by ROC has also been placed on record as Annexure-H. Details given in the preceding paras would establish beyond doubt that the Corporate Applicant has furnished information relating to its books of account and all documents as per the requirement of Section 10 the Code. It has also proposed the name of Interim Resolution Professional. There is no impediment to reject the application. It is infact found complete in all respects. Petition is admitted

Issues Involved:
1. Initiation of Insolvency Resolution Process under Section 10 of the Insolvency and Bankruptcy Code, 2016.
2. Financial difficulties and defaults by the applicant company.
3. Appointment of Interim Resolution Professional.
4. Declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016.
5. Responsibilities and duties of the Interim Resolution Professional.

Detailed Analysis:

1. Initiation of Insolvency Resolution Process under Section 10 of the Insolvency and Bankruptcy Code, 2016
The applicant company filed a petition under Section 10 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Insolvency Resolution Process and requesting the issuance of directions to activate the moratorium under Section 14 of the Code. The petition was filed by Mr. Asit Das, Senior Manager (Legal) of the applicant company, authorized by a Board Resolution dated 30.01.2018.

2. Financial Difficulties and Defaults by the Applicant Company
The applicant company, incorporated in 2007, engaged in manufacturing and exporting fruit pulp, drinks, and concentrates, faced financial distress due to various reasons:
- Continuous increase in the exchange rate of US Dollar adversely affected the applicant’s pre-shipment credit in foreign currency, resulting in reduced borrowing limits and fund flow.
- Insufficient funds led to the inability to release payments to suppliers, resulting in order cancellations and significant losses.
- The company’s account was declared a Non-Performing Asset (NPA) by Oriental Bank of Commerce due to default in loan payments.
- Delays in loan sanctioning led to the spoilage of perishable goods, further exacerbating the financial crisis.

3. Appointment of Interim Resolution Professional
The applicant proposed the name of Mr. Sumit Shukla as the Interim Resolution Professional (IRP). Mr. Shukla provided a written communication confirming that no disciplinary proceedings were pending against him and made necessary disclosures as per the Insolvency and Bankruptcy Board of India (IBBI) Regulations. The tribunal found the application complete and appointed Mr. Shukla as the IRP.

4. Declaration of Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016
The tribunal declared a moratorium, imposing the following prohibitions:
- Institution or continuation of suits or proceedings against the corporate debtor.
- Transfer, encumbrance, alienation, or disposal of any assets or legal rights by 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 or in the possession of 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.

5. Responsibilities and Duties of the Interim Resolution Professional
The IRP is directed to:
- Make a public announcement regarding the admission of the application under Section 7 of the Code within three days.
- Perform functions as outlined in Sections 15, 17, 18, 19, 20, and 21 of the Code with utmost integrity and honesty.
- Ensure cooperation from all personnel connected with the Corporate Debtor, including erstwhile directors and promoters.
- Protect and preserve the value of the property of the Corporate Debtor.
- Report any violations or tainted/illegal transactions by the ex-management to the tribunal for appropriate orders.

Conclusion
The tribunal admitted the petition, initiated the Corporate Insolvency Resolution Process, appointed Mr. Sumit Shukla as the Interim Resolution Professional, and declared a moratorium as per Section 14 of the Insolvency and Bankruptcy Code, 2016. The IRP is mandated to perform his duties with integrity, ensuring cooperation from all associated personnel and protecting the value of the Corporate Debtor’s property.

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