2018 (10) TMI 1580 - Tri - Insolvency and Bankruptcy

Corporate insolvency resolution process - occurrence of default - Held that - By the notice, the corporate debtor was called upon to discharge the entire liability of ₹81,97,40,974 as on date of 12.09.2017 and also future interest thereon along with cost charge and expense within 15 days from the notice failing which the financial creditor, in addition to initiating recovery process under prevailing laws, shall be constrained to exercise all or any of the rights conferred under the Code. The notice of demand is not required to be statutorily issued in respect of initiation of CIRP in the case of financial creditors. However, the contents of the notice clearly bring out the occurrence of default. The occurrence of default is also supported by the issue of notice under Section 13(2) read with Section 13(13) of SARFAESI Act, 2002. Whether the application under Section 7(2) is complete? - Held that - We find that the valuation of the securities does not have much relevance for determination of the question whether the application is to be admitted or rejected. The objection of the learned counsel for the corporate debtor is, therefore, not accepted. As regards the date on which the default occurred, even though the same is not specified in para-2 of Part IV of Form1, we have already noted above that the detail of date of default is available in the Notice under Section 13(2) of the SARFAESI Act, 2002 dated 21.07.2016 enclosed as Annexure A- 25 of the petition. In the reply/objections filed vide Diary No. 645 dated 05.03.2018, it is inter alia submitted that the financial creditor has failed to provide the record of the default with the information utility as required under Section 7 of the Code. Para-3 of Part V of Form 1 requires furnishing of details of record of default with the information utility, if any. It is stated by the financial creditor in Form 1 that the para is not applicable. Further, Section 7(4) requires the Adjudicating Authority to ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under Section 7(3) of the Code. Therefore, no record being available with the information utility, cannot result in making the application under Section 7(2) as incomplete. In view of the above discussion we hold that the application filed by the financial creditor in Form 1 is complete. Whether any disciplinary proceedings are pending against the proposed resolution professional - Held that - In Part-III of Form 1, the financial creditor has proposed the appointment of Shri Hemanshu Jetley, Regn. No. IBBI/IPA-001/IP-P00219/2017-18/10457 as Interim Resolution Professional. The copy of the registration certificate has been annexed as Annexure A-3 of the petition. Form II has been filed at pages 14 to 15 of the petition in which Shri Hemanshu Jetley has agreed to accept appointment as Interim Resolution Professional and has affirmed that he is eligible to be appointed as Resolution Professional in respect of the corporate debtor in accordance with the provisions of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons ) Regulations, 2016. In Form No. 2, Shri Hemanshu Jetley has also certified that there are no disciplinary proceedings pending against him with the Board or Indian Institute of Insolvency Professional of ICAI. In view of the above discussion, the requirements of Section 7(5)(a) are satisfied in the present case and, therefore, the petition is admitted and the moratorium is declared accordingly.

Summary

Issues Involved:
1. Whether a default has occurred.
2. Whether the application under Section 7(2) is complete.
3. Whether any disciplinary proceedings are pending against the proposed Resolution Professional.

Detailed Analysis:

1. Occurrence of Default:
The Tribunal examined the financial facilities granted to the corporate debtor, which included loans and credit limits totaling ?65,48,00,000. As of 31.10.2017, the outstanding amount was ?83,10,72,467.80, inclusive of interest and expenses. The financial creditor provided account statements and certificates under the Bankers Books Evidence Act. Notices under Section 13(2) of the SARFAESI Act were issued, stating the account was classified as Non-Performing Asset (NPA) on 31.03.2014. Despite the corporate debtor's objections, the Tribunal found that the financial creditor had adequately demonstrated the default through various notices and account statements.

2. Completeness of Application Under Section 7(2):
The Tribunal addressed defects pointed out by the corporate debtor, such as the absence of a certificate of registration of charge and the computation of default in a tabular form. These defects were rectified by the financial creditor, who provided the necessary documents, including certified copies of registration of charge and detailed computation of default. The Tribunal noted that the financial creditor had complied with the requirements, making the application complete. The Tribunal also dismissed the corporate debtor's argument regarding the need for updated valuation of securities, stating that such valuation is not mandatory for determining the application’s admission.

3. Disciplinary Proceedings Against Proposed Resolution Professional:
The financial creditor proposed Mr. Hemanshu Jetley as the Interim Resolution Professional, providing his registration certificate and Form II, where he affirmed his eligibility and stated no disciplinary proceedings were pending against him. The Tribunal found this satisfactory and appointed Mr. Jetley as the Interim Resolution Professional.

Conclusion:
The Tribunal concluded that the requirements of Section 7(5)(a) were satisfied, leading to the admission of the petition and the declaration of a moratorium under Section 14 of the Code. The moratorium included the suspension of suits, proceedings, and actions against the corporate debtor, and the prohibition of transferring or disposing of assets. The Tribunal directed the Interim Resolution Professional to take control of the corporate debtor’s assets, constitute a Committee of Creditors, and report progress to the Tribunal regularly. The order was communicated to both parties and the Interim Resolution Professional.