2019 (7) TMI 637 - Tri - Insolvency and Bankruptcy

Admissibility of petition - Initiation of the Corporate Insolvency Resolution Process - Corporate Applicant/Corporate Debtor - existence of debt/default - Section 10 of the Insolvency and Bankruptcy Code, 2016 read with Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT - The corporate applicant is having its outstanding debts due to its Financial and Operational Creditors, but is unable to pay the same, which amounts approximately to ₹ 4,25,17,532.01 to the Financial Creditors. That apart, there is some disputed dues of newly impleaded respondent/objector IFFCO-TOKIO General Insurance Company Ltd. to the extent of ₹ 23,27,535/- only. Hence, the corporate applicant has moved for initiation of CIRP for itself. This Adjudicating Authority is bound to admit an application, if it is found complete by providing requisite information under Section 10 of the I B Code read with Form 6 of the relevant rules and it does not suffer from any ineligibility prescribed under Section 11 of the Code. Therefore, once the IB Petition is found complete, then this Adjudicating Authority cannot reject the application on other grounds as agitated by the IDBI and other objectors - Further, there can be no serious prejudice to their claim when the petition is admitted and CIRP is triggered, as they can still lodge their claim before the IRP/RP which shall be dealt with as per I B Code. The present IB petition is found complete. Hence, it deserves for admission so as to trigger the C.I.R.P under Section 10 the Code - Petition admitted under Section 10 of the Insolvency Bankruptcy Code and the Moratorium under Section 14 of the Code is hereby declared in respect of the Corporate Applicant / Debtor Company.

Issues Involved:
1. Eligibility and maintainability of the application under Section 10 of the Insolvency and Bankruptcy Code, 2016.
2. Financial and operational debts owed by the Corporate Debtor.
3. Objections raised by IDBI Bank.
4. Admissibility of the application and initiation of the Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Eligibility and Maintainability of the Application:
The Corporate Applicant, M/s. Ace Worldwide Tours Ltd., filed the application under Section 10 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of the Corporate Insolvency Resolution Process (CIRP). The application was filed and signed by the Managing Director, Mr. Raju J. Choksi, duly authorized by a Board Resolution dated 10th February 2018. The Tribunal confirmed the eligibility of the Corporate Debtor to move the IB Petition under Section 10 of the Code, as the definition of Corporate Applicant includes a Corporate Debtor.

2. Financial and Operational Debts Owed by the Corporate Debtor:
The Corporate Applicant provided details of its financial and operational creditors. The financial debts owed to various creditors amounted to approximately ?4,25,17,532.01. The operational creditors were owed a sum of ?1,03,45,312.85. The application also included details of liabilities other than creditors, such as employees' dues and statutory liabilities. The Corporate Debtor acknowledged default in making payments to financial creditors, including IDBI Bank Ltd., which had issued demand notices and initiated proceedings under the SARFAESI Act.

3. Objections Raised by IDBI Bank:
IDBI Bank opposed the application on several grounds:
- The application was allegedly filed to thwart recovery actions initiated under the SARFAESI Act.
- IDBI Bank argued that the Tribunal lacked jurisdiction to pass interim relief against its recovery actions.
- It was contended that the Corporate Debtor should have initiated liquidation earlier if it was unable to manage its affairs since 2008.
- IDBI Bank claimed that the application was a fraudulent and malicious attempt to stall its auction process.
- The bank highlighted that the Corporate Debtor's account had been classified as Non-Performing Assets (NPA) and that recall notices had been issued to the Corporate Debtor and its guarantors.

4. Admissibility of the Application and Initiation of CIRP:
The Tribunal considered the objections raised by IDBI Bank but found the application complete and in compliance with Section 10 of the Insolvency and Bankruptcy Code, 2016. The Tribunal referred to judicial precedents, including the decisions in Unigreen Global (P.) Ltd. v. Punjab National Bank and Innoventive Industries Ltd. v. ICICI Bank Ltd., which clarified that the Adjudicating Authority must admit the application if it is complete and does not suffer from any ineligibility under Section 11 of the Code.

The Tribunal concluded that the present IB Petition was complete and deserved admission to trigger the CIRP under Section 10 of the Code. Consequently, the Tribunal admitted the petition and declared a Moratorium under Section 14 of the Code, prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor and other related actions.

Order and Directions:
- The Moratorium commenced from 10.05.2019 and would remain in effect until the completion of the CIRP or approval of the Resolution Plan.
- Mr. Narayan Gajanan Vidvans was appointed as the Interim Resolution Professional (IRP).
- The IRP was directed to make a public announcement of the CIRP and call for submissions of claims.
- The Tribunal prohibited the continuation of pending suits or proceedings against the Corporate Debtor and actions to foreclose or recover any security interest.
- The supply of essential goods or services to the Corporate Debtor was not to be terminated during the Moratorium period.

Conclusion:
The Tribunal admitted the application under Section 10 of the Insolvency and Bankruptcy Code, 2016, and initiated the Corporate Insolvency Resolution Process for the Corporate Debtor, M/s. Ace Worldwide Tours Ltd. The Moratorium was declared, and Mr. Narayan Gajanan Vidvans was appointed as the Interim Resolution Professional.

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