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Judgment
The application is filed by the Corporate Applicant for initiating CIRP under Section 10 of Insolvency and Bankruptcy Code, 2016 read with Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rule, 2016. The Corporate Applicant is Benara Automotives Pvt. Ltd., whose Identification number is U50300UP1992PTC013928, and Shri Rajesh Benara and Shri Pratham Benara, being the Promoters and Directors has filed this application on behalf of the Corporate Applicant on the basis of board resolution dated 28.11.2018.
Corporate Applicant has also proposed the name of Mr. Arun Chadha to act as Interim Resolution Professional (IRP); Registration No. IBBI/IPA-001/IP-P00165/2017-18/10334 and a copy of Form-2 under Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 is attached herewith and annexed as Annexure 6(2).
It is stated that the Corporate Debtor availed the Financial/Creditor facilities Kotak Mahindra Bank and Indusind Bank. The Corporate Debtor due to some reasons beyond control failed to regularize the account of the above Financial Creditor and as a result of which, they had classified the account of the Corporate Debtor as Non-Performing Asset (NPA) on different dates. Consequently, the Financial creditors declared its case as NPA. Indusind Bank vide letter dated 18.08.2018 has issued Notice u/s 13(2) of the SARFAESI Act, 2002.
In order to corroborate this submission, the Applicant has placed before us the following documents evidencing the default made by the Applicant:
A copy of Notice u/s 13(2), SARFAESI ACT, 2002 dated 12.04.2017 by Indusind Bank. ii. Copy of Demand Notice issued by the Customs Department (CGST & Central Excise Commissioner, Agra) iii. Audited Balance Sheet for the Financial Year 2017-18, 2016-17.
Provisional Financial Statements for the Current Financial Year made up to date not earlier than fourteen days from the date of the Application.
Copy of Legal Notice issued by the Operational Creditor along with the Copy of invoices from the same and etc.
Further, the Respondents were given sufficient opportunity to be heard. Since no reply was filed by the Respondents, the matter proceeded Ex-Parte vide order dated 15.11.2019.
As per the provision of Section 10 of Insolvency and Bankruptcy Code: (1) Where a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating corporate insolvency resolution process with the Adjudicating Authority.
(2)The application under sub-section (1) shall be filed in such form, containing such particulars and in such manner and accompanied with such fee as may be prescribed.
(3)The corporate applicant shall, along with the application furnish the information relating to—
(a)its books of account and such other documents relating to such period as may be specified; and
(b)the resolution professional proposed to be appointed as an interim resolution professional.
(4)The Adjudicating Authority shall, within a period of fourteen days of the receipt of the application, by an order—
(a)admit the application, if it is complete; or
(b)reject the application, if it is incomplete.
Provided that Adjudicating Authority shall, before rejecting an application, give a notice to the applicant to rectify the defects in his application within seven days from the date of receipt of such notice from the Adjudicating Authority.
(5)The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (4) of this section.
Section 10 of the Insolvency and Bankruptcy Code, 2016 mandates only two essential requirements – the existence of Debt and Default. Section 10(4) stipulates that once the Application is complete in all aspects and prescribed form along with the requisite fee, it is liable to be accepted. The Hon'ble Supreme Court in the case of "Innoventive Industries" has held that:
"On the other hand, as we have seen, in the case of a corporate debtor who commits a default of financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that default has occurred. It is of no matter that the default is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority may reject an application and not otherwise."
Further, the Hon'ble NCLAT followed the decision of Hon'ble Supreme Court in "Innoventive Industries Ltd. and its decision in the matter of "M/s Unigreen Global Private Limited vs Punjab National Bank and others" – Company Appeal (AT) (Insolvency) 81/2017 in the matter of Company Appeal (AT) (Insolvency) 100/2017 Leo Duct Engineers & Consultants Limited Vs Canara Bank & Standard Chartered Bank and held as under:
"20.Under both Section 7 and Section 10, the two factors are common i.e. the debt is due and there is a default. Sub-section (4) of Section 7 is similar to that of sub-section (4) of Section 10. Therefore, we hold that the law laid down by the Hon'ble Supreme Court in "Innoventive Industries Ltd. (Supra) is applicable for Section 10 also, wherein the Hon'ble Supreme Court observed as "The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority".
21.In an application under Section 10, the 'financial creditor' or 'operational creditor', may dispute that there is no default or that debt is not Comp. App. (AT) (Insolvency) No. 81/2017 2 2 due and is not payable in law or in fact. They may also oppose admission on the ground that the Corporate Applicant is not eligible to make application in view of ineligibility under Section 11 of the I & B Code. The Adjudicating Authority on hearing the parties and on perusal of record, if satisfied that there is a debt and default has occurred and the Corporate Applicant is not ineligible under Section 11, the Adjudicating Authority has no option but to admit the application, unless it is incomplete, in which case the Corporate Applicant is to be granted time to rectify the defects.
22.Section 10 does not empower the Adjudicating Authority to go beyond the records as prescribed under Section 10 and the information as required to be submitted in Form 6 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 subject to ineligibility prescribed under Section 11. If all information is provided by an applicant as required under Section 10 and Form 6 and if the Corporate Applicant is otherwise not ineligible under Section 11, the Adjudicating Authority is bound to admit the application and cannot reject the application on any other ground.
23.Any fact unrelated or beyond the requirement under I & B Code or Forms prescribed under Adjudicating Authority Rules (Form 6 in the present case) are not required to be stated or pleaded. Non-disclosure of any fact, unrelated to Section 10 and Form 6 cannot be termed to be suppression of facts or to hold that the Corporate Applicant has not come with clean hand except the application where the 'Corporate Applicant' has not disclosed disqualification, if any, under Section 11. Non-disclosure of facts, such as that the 'Corporate Debtor' is undergoing a corporate insolvency resolution Comp. App. (AT) (Insolvency) No. 81/2017 2 3 process; or that the 'Corporate Debtor' has completed corporate insolvency resolution process twelve months preceding the date of making of the application; or that the corporate debtor has violated any of the terms of resolution plan which was approved twelve months before the date of making of an application under the said Chapter; or that the corporate debtor is one in respect of whom a liquidation order has already been made can be a ground to reject the application under Section 10 on the ground of suppression of fact/not come with clean hand.
24.1st Respondent -financial creditor has referred to pendency of a Civil Suit between 'Mayank Maheshwari v. Anurag Garg' and another suit between 'Sh. Jagar Nath Mehto v. Vedika Overseas Tradex Ltd.'. Pendency of such suits cannot be a ground to deny admission of an application under Section 10, if all the information in terms of Section 10 of the I & B Code and Form 6 has been supplied by a Corporate Applicant/Corporate Debtor and the application is otherwise complete. Non-mentioning of suit(s) pending between the parties cannot termed to be suppression of facts nor can be a ground to reject the application. In fact, once the application under Section 10 is admitted, all such related proceedings, including suits for recovery of moveable or immovable property of the Corporate Debtor and other proceeding cannot proceed further in any Court or Tribunal or Authority in view of order of 'moratorium' as may be declared under Section 13 and prohibition that may be imposed under Section 14 of I & B Code.
25.Similarly, if any action has been taken by a 'Financial Creditor' under Section 13(4) of the SARFAESI Act, 2002 against the Corporate Debtor or a Comp. App. (AT) (Insolvency) No. 81/2017 2 4 suit is pending against Corporate Debtor under Section 19 of DRT Act, 1993 before a Debt Recovery Tribunal or appeal pending before the Debt Recovery Appellate Tribunal cannot be a ground to reject an application under Section 10, if the application is complete.
26.Any proceeding under Section 13(4) of the SARFAESI Act, 2002 or suit under Section 19 of the DRT Act, 1993 pending before Debt Recovery Tribunal or appeal pending before Debt Recovery Appellate Tribunal cannot proceed in view of the order of moratorium as may be passed.
Given the above stated factual and legal position of the case we are of the view that the corporate debtor has complied with the provision of Section 10 of the Code, there is a debt and default has occurred, the application is complete, and the Corporate Applicant is not ineligible under Section 11.
Therefore, we admit the Petition and declare Moratorium with the Consequential Directions given as under:
I. That the order of Moratorium u/s 14 shall have the effect from the date of this order till the completion of Corporate Insolvency Resolution process or until this Bench approves the resolution plan under Sub-section (1) of Section31 or passes an order for liquidation of Corporate Debtor under Section 33, as the case may be.
II. That the Bench hereby prohibits the institution of suits or continuation of pending suit or proceedings against the Corporate Debtor including execution of any judgment, decree or order authority; court of law, tribunal, arbitration panel or other authority transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the SARFAESI Act, 2002; the recovery of any property by an owner or less or where such property is occupied by or in possession of the Corporate Debtor.
III. That the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during the Moratorium period.
IV. That the provisions of Section 14 Sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
V. That this Bench at this moment appoints Mr. Arun Chadha; Registration No. IBBI/IPA-001/IP-P00165/2017-18/10334 as Interim Resolution Professional to carry the functions as mentioned under Insolvency and Bankruptcy Code.
VI. That the public announcement of Corporate Insolvency Resolution Process is made immediately as specified under Section 13 of the Code and calling for submissions of a claim under Section 15 of the Code.
VII. The Interim Resolution Professional shall perform all his functions strictly which are contemplated, inter alia by Sections 17, 18, 20, 21 of the Code. It is further made clear that all the personnel connected with Corporate Debtor, its promoter or any other person associated with Management of the Corporate Debtor are under a legal obligation under Section 19 of the Code extend every assistance and cooperation under Section 19 of the Code extend every assistance and cooperation to the Interim Resolution Professional. IRP would be at liberty to make appropriate application to this Tribunal with a prayer for passing an appropriate order. The IRP shall be under a duty to protect and preserve the value of the property of the Corporate Debtor as a part of its obligation imposed by Section 20 of the Insolvency and Bankruptcy Code, 2016.
VIII. The Registry is at this moment directed to communicate this order to the Financial Creditors and the Corporate Debtor after the completion of necessary formalities and a copy of this order be transmitted to the IRP as well.
At the matter on 20.02.2020 for filing Progress Report.