2020 (3) TMI 1131 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - Section 7(5) of the Code provides for admission of the application where the Adjudicating Authority is satisfied that (a) a default has occurred ; (b) the application under sub-section (2) of section 7 is complete ; (c) there is no disciplinary proceedings pending against the proposed resolution professional. The satisfaction of the three conditions is being examined The first condition is that a default has occurred. The default in repayment of debt is supported by account statements filed by the bank at annexure P7 and certificate under section 2A(a) and 2A(b) of the Bankers' Books Evidence Act, 1891 in support of the account statements appended with the petition. It is the case of the respondent-corporate debtor that the account of the respondent-corporate debtor was wrongly declared as non- performing asset while one time settlement proposal was kept pending by petitioner-bank. It is stated by the petitioner-bank that no payment has been made towards the settled amount and the bank has revocated such proposal accordingly. Thus, we do not see any merit in the contention of the respondent-corporate debtor and pendency of any one time settlement cannot be an embargo in triggering the provisions under the Code - It is the settled principle of law that CIRP is not a proceeding for recovery of money nor a suit or litigation. Hence, the interim order dated June 26, 2018 cannot come in the way of this Adjudicating Authority in initiation of CIRP against the respondent-corporate debtor, if all other requirements of the Code are satisfied. The second condition is that the application under section 7(2) is complete - it is already established that the application is complete. The third condition is that there are no disciplinary proceedings pending against the proposed resolution professional. In the present case, Shri Neeraj Bhatia, IBBI/IPA-001/IP-P00824/2017-18/11400, has been proposed as interim resolution professional. Form 2 filed by the proposed interim resolution professional is at page 374A of the petition. Shri Neeraj Bhatia has certified that there are no disciplinary proceedings pending against him with the Board or Indian Institute of Insolvency Professional of ICAI. He has also affirmed that he is eligible to be appointed as a resolution professional in respect of the corporate debtor in accordance with the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporation Persons) Regulations, 2016. In view of the satisfaction of the conditions provided for in section 7(5) of the Code, the petition for initiation of CIRP in the case of M/s. S. A. Gold Ispat P. Ltd., is admitted - petition admitted - moratorium declared.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Existence of default and outstanding debt.
3. Pre-existing disputes and pending civil suits.
4. Compliance with procedural requirements under the Code.
5. Appointment of Interim Resolution Professional (IRP).
6. Declaration of moratorium and its implications.

Detailed Analysis:

1. Initiation of CIRP under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The petition was filed by the financial creditor, Jammu and Kashmir Bank, under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor, S. A. Gold Ispat P. Ltd. The application was submitted in Form 1 as prescribed under Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

2. Existence of Default and Outstanding Debt:
The corporate debtor had availed various credit facilities from the financial creditor, including a working capital facility initially sanctioned at ?3.20 crores and subsequently enhanced to ?12 crores. Due to non-payment, the account of the corporate debtor was declared as a non-performing asset (NPA) on March 31, 2016. The total outstanding debt was ?18.73 crores, including interest at 15.25% per annum from January 1, 2016, until recovery. The default in repayment was supported by account statements and a certificate under the Bankers' Books Evidence Act, 1891.

3. Pre-existing Disputes and Pending Civil Suits:
The corporate debtor contended that there were pre-existing disputes, citing two civil suits pending against the financial creditor. One suit sought a declaration that the revocation of a one-time settlement proposal was null and void. However, the Tribunal found that the pendency of such suits did not preclude the initiation of CIRP, as the suits did not dispute the liability of the corporate debtor to pay the debt. The Tribunal also noted that CIRP is not a proceeding for recovery of money but a process to resolve insolvency.

4. Compliance with Procedural Requirements under the Code:
The Tribunal examined the application under Section 7(2) and found it to be complete. The application included all necessary particulars, such as details of the financial debt, documents, records, and evidence of default. The Tribunal also verified that there were no disciplinary proceedings pending against the proposed IRP.

5. Appointment of Interim Resolution Professional (IRP):
Shri Neeraj Bhatia was proposed as the IRP, and his credentials were verified. The IRP's Form 2 certification confirmed that there were no disciplinary proceedings against him. The Tribunal appointed Shri Neeraj Bhatia as the IRP, directing him to take control and custody of the corporate debtor's assets, manage its affairs, and perform duties as enjoined under the Code.

6. Declaration of Moratorium and Its Implications:
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 or disposing of its assets, and recovering any property by an owner or lessor. The moratorium would remain in effect until the completion of the CIRP or until the Tribunal approved a resolution plan or ordered liquidation. The Tribunal also directed the IRP to make a public announcement, constitute a committee of creditors, and submit regular progress reports.

Conclusion:
The Tribunal admitted the petition for initiation of CIRP against S. A. Gold Ispat P. Ltd., satisfied that the conditions under Section 7(5) of the Code were met. The moratorium was declared, and Shri Neeraj Bhatia was appointed as the IRP to manage the corporate debtor's affairs and proceed with the insolvency resolution process.

← Previous Next →