2019 (7) TMI 1301 - AT - Insolvency and Bankruptcy

Admissibility of petition - Initiation of Corporate Insolvency Resolution Process - Corporate Debtor - eligibility of Corporate Debtor for filing an application u/s 10 of Insolvency Bankruptcy Code 2016 - HELD THAT - From the record it appears that there is income and profit generated by the Company in the financial year 31st March 2017 we are not inclined to interfere with the impugned order. Appeal dismissed.

Summary

Issues:
1. Rejection of application for initiation of Corporate Insolvency Resolution Process under Section 10 of the Insolvency & Bankruptcy Code, 2016.
2. Interpretation of the term 'Operational Creditor' under the I&B Code.
3. Consideration of income and profit generated by the Company for determining eligibility for insolvency proceedings.

Analysis:

1. The Corporate Applicant filed an application under Section 10 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process. The National Company Law Tribunal rejected the application on the grounds that the Corporate Debtor was earning sufficient income, indicating no reason for insolvency proceedings.

2. The Respondent contended that the Securities and Exchange Board of India (SEBI) should be considered an Operational Creditor. Referring to a previous judgment, the Appellate Tribunal clarified the definition of 'Operational Debt' as including statutory dues like Income Tax and Value Added Tax, which have a direct nexus with the operation of the Company.

3. The Appellant argued that the Company was in a loss and unable to pay the amount. However, based on the Company's income and profit in the financial year ending March 31, 2017, the Tribunal declined to interfere with the impugned order, ultimately dismissing the appeal without costs.

This judgment highlights the importance of financial viability in determining eligibility for insolvency proceedings, clarifies the scope of 'Operational Debt' and 'Operational Creditor' under the I&B Code, and emphasizes the relevance of a Company's financial status in such proceedings.