2019 (1) TMI 522 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process under section 10 of Insolvency & Bankruptcy Code 2016 - sub rule (1) of Rule 7 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016 - scope of Corporate debtor - Held that - Under Clause (b) of Section 10(3) the corporate applicant is bound to propose the name of Registered Resolution Professional proposed to be appointed as Interim Resolution Professional. We have perused the written communication in Form No.2 Annexure-III furnished by Mr. Arvind Kumar a registered Resolution Professional with IBBI. This Form contains all the particulars provided in the Form. He has furnished his written consent and stated that presently he is not serving as such in any proceedings under the Code so far - It is now to be seen whether the petitioner has also complied with Section 10(3)(c) of the Code. There was complete loss of net worth of the corporate debtor. It is clear from the above that the corporate debtor has failed to pay its debt and has thus committed default. In fact the learned counsel for the financial creditor has not raised any objection to the admission of the petition in view of the default committed by the petitioner-corporate debtor, nor any reply to the petition was filed. It clearly seems that the corporate debtor has fallen into debt trap and thus competent to set in motion the insolvency resolution process under the Code to ensure maximum value of assets which is in the interest of all the stakeholders. The petition is admitted.

Issues Involved:
1. Jurisdiction and territorial authority.
2. Financial status and liabilities of the Corporate Debtor.
3. Compliance with procedural requirements under the Insolvency and Bankruptcy Code, 2016.
4. Appointment of Interim Resolution Professional.
5. Declaration of moratorium and its implications.

Issue-wise Detailed Analysis:

1. Jurisdiction and Territorial Authority:
The Corporate Debtor, M/s Bhagat Ram Motor Ways Private Limited (BRMWPL), was incorporated on 10.06.2011 with its registered office in Una, Himachal Pradesh. The matter falls within the territorial jurisdiction of the National Company Law Tribunal, Chandigarh.

2. Financial Status and Liabilities of the Corporate Debtor:
The Corporate Debtor was advanced various financial facilities by multiple creditors, including State Bank of India, Central Bank of India, HDB Financial Services, Daimler Financial Services India Pvt. Ltd., Kangra Central Cooperative Bank Ltd., and Vinayak Construction Co. Due to the closure of operations of General Motors Pvt. Ltd. in India and a general business slowdown, the Corporate Debtor started incurring losses, rendering its inventory unsaleable. The financial status as of 31.03.2018 showed significant outstanding amounts across various credit facilities, indicating a complete loss of net worth and default in debt repayment.

3. Compliance with Procedural Requirements:
The petition was filed under Section 10 of the Insolvency and Bankruptcy Code, 2016, by the Corporate Debtor through its authorized director, Mr. Tushar Sharma. The application included necessary documents such as the Memorandum and Articles of Association, financial statements, and details of creditors. The Tribunal noted several defects during the proceedings, including the absence of invoices for operational creditors and the resolution of the Extraordinary General Meeting (EOGM). These defects were subsequently rectified, and the application was deemed complete in all respects.

4. Appointment of Interim Resolution Professional:
The Corporate Debtor proposed Mr. Arvind Kumar as the Interim Resolution Professional (IRP). His written consent, qualifications, and absence of disciplinary proceedings were verified and found satisfactory. Consequently, Mr. Arvind Kumar was appointed as the IRP with specific directions to take control of the Corporate Debtor's assets, make a public announcement, and manage the insolvency resolution process.

5. Declaration of Moratorium and Its Implications:
Upon admitting the petition, 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, encumbering, or disposing of any assets of the Corporate Debtor.
- Actions to foreclose or enforce any security interest.
- Recovery of property by owners or lessors.

The moratorium will remain in effect until the completion of the corporate insolvency resolution process or the approval of a resolution plan or liquidation order. The supply of essential goods or services to the Corporate Debtor shall not be terminated during the moratorium period.

Conclusion:
The Tribunal admitted the insolvency petition, declared a moratorium, and appointed Mr. Arvind Kumar as the Interim Resolution Professional, directing him to manage the insolvency resolution process in accordance with the Code and relevant regulations. The Corporate Debtor's financial distress and compliance with procedural requirements were thoroughly examined, ensuring the initiation of the Corporate Insolvency Resolution Process.

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