2018 (11) TMI 1013 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - delay in repayment of outstanding financial debt - Held that - In the case on hand, it is seen that respondent corporate debtor has availed the loan and committed default in repayment of the outstanding financial debt. On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. Accordingly, it is seen that the 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 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. In pursuance of Section 13(2) of the Code, we direct that public announcement shall be made by the Interim Resolution Professional immediately (3 days as prescribed by the IBBI Regulations) with regard to admission of this application under Section 7 of the Insolvency & Bankruptcy Code, 2016.

Summary

Issues Involved:
1. Jurisdiction of the Tribunal.
2. Legal standing of the applicant bank to file the application.
3. Appointment of the Interim Resolution Professional (IRP).
4. Objections raised by the respondent regarding the maintainability of the application.
5. Evidence of financial debt and default.
6. Pendency of other legal proceedings.
7. Commercial insolvency of the respondent.
8. Admission of the application and declaration of moratorium.

Detailed Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal confirmed its jurisdiction over the matter as the registered office of the respondent corporate debtor is located in the NCT of Delhi, making it the appropriate Adjudicating Authority under Section 60(1) of the Insolvency and Bankruptcy Code, 2016.

2. Legal Standing of the Applicant Bank:
The applicant, Indian Overseas Bank, filed the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The bank is recognized as a financial creditor, having sanctioned a term loan of ?60 crores to the respondent. The application was filed by Mr. M. Ravindran Menon, authorized representative of the bank.

3. Appointment of the Interim Resolution Professional (IRP):
Initially, Mr. Hemant Sharma was proposed as the IRP. However, due to objections from the respondent, the applicant bank substituted Mr. Anil Kumar as the IRP. Mr. Anil Kumar met all the statutory requirements, including no pending disciplinary proceedings, as per Section 7(3)(b) of the Code.

4. Objections Raised by the Respondent:
The respondent raised several objections:
- Consortium of Banks: The respondent argued that the applicant bank could not file the application without the consent of other consortium banks. The Tribunal rejected this, citing that Section 7(1) of the Code allows a financial creditor to file an application individually or jointly.
- Authority of the Applicant’s Representative: The respondent questioned the authority of Mr. M. Ravindran Menon to file the application. The Tribunal found that Mr. Menon was duly authorized by the bank’s board of directors.
- Execution of Loan Documents: The respondent alleged that the bank forced them to sign unfilled documents. The Tribunal dismissed this claim, stating that the loan agreements were mutually executed after careful examination by the respondent.

5. Evidence of Financial Debt and Default:
The applicant bank provided substantial evidence, including loan documents, statements of account, and acknowledgments of debt, to prove the existence of financial debt and default. The Tribunal noted that the default occurred on 02.03.2012, and as of 31.03.2018, the outstanding amount was ?177,00,28,591.80.

6. Pendency of Other Legal Proceedings:
The Tribunal clarified that the pendency of proceedings under the SARFAESI Act and the Recovery of Debts Due to Banks and Financial Institutions Act does not bar the initiation of the Corporate Insolvency Resolution Process under Section 7 of the Code.

7. Commercial Insolvency of the Respondent:
The applicant bank argued that the respondent had become commercially insolvent due to the outstanding dues. The Tribunal agreed, noting that the respondent failed to adhere to the terms of the loan agreements and did not clear the outstanding dues despite multiple notices.

8. Admission of the Application and Declaration of Moratorium:
The Tribunal found the application complete, with no disciplinary proceedings against the proposed IRP. Consequently, the application was admitted under Section 7(5)(a) of the Code. A moratorium was declared under Section 14 of the Code, prohibiting suits, asset transfers, enforcement actions, and recovery of property by owners or lessors against the corporate debtor.

Conclusion:
The Tribunal admitted the application, appointed Mr. Anil Kumar as the IRP, and directed a public announcement of the insolvency resolution process. A moratorium was declared, and the IRP was instructed to manage the corporate debtor’s affairs in accordance with the Code, ensuring cooperation from all personnel associated with the corporate debtor.