2020 (10) TMI 588 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - debt and due payable or not - HELD THAT - A creditor of the debtor company can raise a defence that there is no default or debt is not due or payable in fact or law as is the case in applications under section 7 - The main objector in the instant case is NAFED, who have not denied the existence of debt or default but have only raised objection as to the quantum of debt as accepted by the Corporate Applicant in its application. The argument advanced by NAFED is that the Corporate Applicant has shown only ₹ 57.50 Cr, as debt in default but in fact the said amount was the OTS amount agreed between parties with the agreement that if instalments as agreed were not paid by the Corporate Applicant, the OTS will be cancelled and entire dues will get revived. According to NAFED, their total debt and default is to the tune of ₹ 132.21 Cr. It is contended on behalf of the objector/NAFED that since the application under section 10 does not reflect the correct figure of debt owed to the Objector, the same cannot be termed as complete and therefore the same should be rejected. It is clear the NAFED has not raised any defence to say that there is no debt or no default, rather they have contended that the amount of debt and default is much higher than reported by the Corporate Applicant. The Corporate Applicant does not fall within the prohibitions stipulated in Section 11 of the Code - this Adjudicating Authority is inclined to admit the instant application filed under section 10 of the Code - Application admitted - moratorium declared.

Issues Involved:
1. Compliance with Section 10 of the Insolvency and Bankruptcy Code, 2016.
2. Objections raised by the Financial Creditor (NAFED) regarding the completeness and accuracy of the application.
3. Validity of the special resolution passed by the Corporate Applicant.
4. Appointment of Interim Resolution Professional (IRP) and commencement of Corporate Insolvency Resolution Process (CIRP).
5. Declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Compliance with Section 10 of the Insolvency and Bankruptcy Code, 2016:
Section 10 allows a corporate debtor to file for initiating CIRP if there is a default. The application must include particulars such as books of account, documents, and a special resolution passed by shareholders. The Tribunal found that the Corporate Applicant met these conditions by providing necessary documents, including a special resolution dated 16.07.2018 and Form MGT-14 submitted to MCA on 25.07.2018. The application was deemed complete, and no disciplinary proceedings were pending against the proposed IRP.

2. Objections raised by the Financial Creditor (NAFED) regarding the completeness and accuracy of the application:
NAFED argued that the Corporate Applicant failed to attach necessary documents proving operational debt and understated the debt owed. They contended that the debt shown was ?57.50 Cr, whereas the actual debt was ?132.21 Cr. The Tribunal noted that NAFED did not deny the existence of debt or default but only disputed the quantum. It held that the IRP/RP would verify claims based on the Corporate Applicant's books and documents, and the application was not incomplete on these grounds.

3. Validity of the special resolution passed by the Corporate Applicant:
NAFED claimed that the Corporate Applicant did not file the special resolution required for voluntary insolvency. The Corporate Applicant countered by providing evidence of the special resolution passed unanimously on 16.07.2018 and filed with the Registrar of Companies. The Tribunal accepted this evidence, confirming compliance with procedural requirements under the Companies Act, 2013.

4. Appointment of Interim Resolution Professional (IRP) and commencement of Corporate Insolvency Resolution Process (CIRP):
The Tribunal appointed Shri. Ramachander Rao Bikumalla as the IRP, finding no disciplinary proceedings against him. The CIRP was ordered to commence, with the IRP directed to take charge immediately and make a public announcement within three days. The IRP was also instructed to comply with Sections 13(2), 15, 17, and 18 of the Code, and the Corporate Applicant's management was directed to cooperate under Section 19.

5. Declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal declared a moratorium effective from the date of the order until the completion of the CIRP. This moratorium prohibits the institution or continuation of suits, transferring or disposing of assets, and actions to recover property or enforce security interests. Essential goods and services to the Corporate Applicant must not be terminated during this period. The IRP was tasked with protecting and preserving the Corporate Applicant's value and managing operations as a going concern.

Conclusion:
The Tribunal admitted the application under Section 10 of the Insolvency and Bankruptcy Code, 2016, and initiated the CIRP for the Corporate Applicant. It appointed an IRP and declared a moratorium, ensuring compliance with procedural requirements and addressing objections raised by NAFED. The decision underscores the importance of meeting statutory conditions and the role of the IRP in verifying claims and managing the insolvency process.

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