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TMI Blog2018 (7) TMI 2183X X X X Extracts X X X X X X X X Extracts X X X X ..... by Prism Infracon Ltd and not by Prism Industrial Complex Limited, it cannot be sold and proceeds utilised for meeting the liabilities of Prism Industrial Complex Limited. The present case is one where interests of a large number of retail investors, from whom money has been raised in the guise of debentures or deposits, is involved, None of these retail investors, who have been deprived of their life s savings, could be intending to be benevolent to think of resolution or revival of such a company. it is also evident that having raised money from numerous investors, the promoters/directors have siphoned the funds out into various affiliated companies. This is evident from a study of the balance sheet of the company - This will actually mean the orders made by SEBI or NCLT for immediate refund of the money raised from retail investors will not be implemented during the moratorium period. Also, the constitution of the Committee of Creditors and the system of voting there at, goes on the basis of majority by value. It is quite possible that the corporate person may have created creditors with high value, who may care least for the interests of retail investors, from whom money has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not paid any amount on redemption date. Even after constant reminders and visits, respondent company has not shown, any inclination in paying the redemption amount and monthly return. Therefore, Corporate Debtor has defaulted in payment of ₹ 96,15,553/- ((Rupees Ninety Six Lakh Fifteen Thousand Five Hundred and Fifty Three). 3.3 That after all failed attempts to realise the payment, the Financial Creditors (Applicants) have filed this petition U/S 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency Bankruptcy Code (Application to Adjudicating Authority) Rules, 2016, before this Tribunal to initiate Corporate Insolvency Resolution Process against Corporate Debtor. 4. The declaration from the Insolvency Professional namely, Mr Shravan Kumar Vishnoi, in FORM-2 has been received and enclosed as Annexure A4 to the present application. 5. In reply to the present Petition, Counsel representing Corporate Debtor has filed its no objections in the form of affidavit, claiming that CIRP process will be in the interest of the debenture holders/depositors and the corporate debtor. The payment of all the debenture holders including the claim/debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ROC by Prism Industrial Complex Limited: Company has filed its annual accounts only up to financial year 2012-13. Annual accounts for the FY 2013-14, 2014-15, 2015-16 and 2016-17 have not been filed. Hence it is not possible to ascertain the current state of affairs of the company and its properties. From perusal of accounts for the financial year 2012-13, itis gathered that secured debentures of the aggregate value of ₹ 31.79 crore were issued op to 31 March 2017. The paid-up share capital of the company on that date was merely ₹ 5 lakh + 50 lakh (application money) = total = ₹ 55 lakhs. The only tangible asset of the company was land valuing = ₹ 75.08 lakhs. This land is the only security provided for issuing debentures. The security was farce and highly inadequate. The balance sheet does not disclose any information about the area and location of the land and its market value. It is also noticed that Prism Industrial Complex Limited has appointed its holding company i.e. Prism Infracon Ltd as the Trustee for the debenture holders. As 31 March 2013, 60% of the shares are Prism Industrial Complex Limited were held by Prism Infracon Ltd and 28% by Kaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will at all be available for discharging the liabilities of Prism Industrial Complex are all doubtful and uncertain. The intention of the Companies highly suspicious and malafide and intended to divert the attention of this Tribunal from the main issue and linger on the proceedings. The report of the Amicus Curiae indicates that the corporate debtor i.e. the Prism Industrial Complex Limited wants to linger on the proceedings which have been initiated under section 71 and 73 of the Companies act 2013. In most of the cases which were filed under section 71 and 73 of the Companies Act 2013, orders have been passed for making payment of the debentures/deposits against the corporate debtor company i.e. the Prism Industrial Complex Limited. On perusal of the report of Amicus Curiae it appears that the corporate debtor company i.e. The Prism Industrial Complex Limited has committed a financial fraud. It appears that the corporate debtor company has issued secured debentures of the aggregate value of ₹ 31.79 crores up to 31 March 2017. The paid-up share capital of the company on that date was merely [= ₹ 5 lakh +50 lakh (application money)] ₹ 55 lakhs. The only tangi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such an application for declaration of insolvency and moratorium under sec. 7 cannot be granted. First reason is purely a question of bonfide reasons for making the application , and the implications of the insolvency declaration and ensuing moratorium. There is no doubt that the enactment of the insolvency resolution process under the IBC is a step towards resolution or rectification of an insolvency. There is a company which had run into financial problems; the creditors are proposing to collectively bail the company out. These provisions are intended for repairing a broken house that still can be repaired, and can avoid demolition. The intent of insolvency resolution process cannot be to interfere in cases where there are financial irregularities, illegalities or indications of a financial fraud. The present case is one where interests of a large number of retail investors, from whom money has been raised in the guise of debentures or deposits, is involved, None of these retail investors, who have been deprived of their life s savings, could be intending to be benevolent to think of resolution or revival of such a company. it is also evident that having raised mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould get into a tail spin. Such a serious implication to the financial system does not become irrelevant if the entity in question is accepting deposits without proper registration. In fact, keeping such entities outside a benevolent, remedial law such as IBC, is all the more important for such a truant entity, which is sitting with public money, and that too, without any authorization. The consequential impact of the commencement of CIRP will be moratorium. This will actually mean the orders made by SEBI or NCLT for immediate refund of the money raised from retail investors will not be implemented during the moratorium period. Also, the constitution of the Committee of Creditors and the system of voting there at, goes on the basis of majority by value. It is quite possible that the corporate person may have created creditors with high value, who may care least for the interests of retail investors, from whom money has been raised. Hence, the so-called resolution plan may harm the interests of such investors. Considering the intent of the CIRP provisions, public interest involved and the ends of justice, the we are of the view that in the present case, the application for CIR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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