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Judgment
PER: HARNAM SINGH THAKUR, MEMBER (JUDICIAL)
The present petition has been filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘Code’) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 by Ms. Manju Gutpa (hereinafter referred to as ‘Petitioner/Financial Creditor’) to initiate the Corporate Insolvency Resolution Process (‘CIRP’) against Orchid Textiles Private Limited (hereinafter referred to as ‘Respondent/Corporate Debtor’). The petition is signed by Ms. Manju Gupta and the affidavit verifying the contents of the application is on page 15-17 of the petition.
The master data of the corporate debtor is stated to be filed as Annexure-A-1 of the petition. The Corporate Debtor is stated to be incorporated on 13.04.2006 and is a doing the business in textiles. The company having its registered address at Village Saidpura, Derabassi, Mohali PB-147001 IN. Therefore, the jurisdiction lies with this Bench of the Tribunal.
Brief facts raising to the present Company Petition which are necessary for disposal of the same are narrated hereunder:
The corporate debtor in year 2014, through its directors approached the petitioner to secure a loan of Rs. 60,00,000/- till 01.04.2018 (“the “Financial Debt”).
The petitioner on 12.12.2014 entered into a loan agreement with the corporate debtor (the “Agreement”) (Annexure A4). The amount was given in cash as and when required by the corporate debtor for meeting its working capital requirements.
The corporate debtor failed to pay even a single instalment of interest as per the terms of the agreement. Further, on the event of non-payment of loan amount the parties further entered into a supplementary MOU on 01.04.2018 for a further period of 1 year i.e. till 31.03.2019 interest @ 18% per annum.
It is stated that on 01.07.2019 the petitioner as per terms of the Agreement approached the Arbitrator to get the settlement done. The sole Arbitrator passed an award on 12.10.2020, directing the respondent to pay Rs. 95,10,000/- plus interest @ 12% from the period of 01.04.2018 till the time of payment of the debt.
The petitioner sent reminders via speed post on 23.10.2020 requesting the corporate debtor to repay the loan immediately. In its reply dated 30.10.2020 the directors of the corporate debtor have clearly stated their inability to repay the amount of loan.
In Part-III of Form No.1, Mr. Pawan Sharma, Registration No.IBBI/IPA-002/IP-N00779/2019-2020/12463 has been proposed as Interim Resolution Professional (IRP). Form No.2 dated 02.12.2020 along with the Certificate of Registration issued by the Indian Institute of Insolvency Professional of ICAI and the certificate of IBBI issued in favour of proposed Interim Resolution Professional i.e. Mr. Pawan Sharma are attached at Annexure-A-2 of the petition.
It is stated in Part-IV of Form No.1 that the petitioner has provided loan amount of Rs.60,00,000/- (principal). The total amount claimed to be in default is Rs.1,25,08,386/- as on 15.11.2020(including interest). Copy of MOU (Annexure A-3), copy of loan agreement dated 12.12.2014(Annexure A-4). Copy of revised supplementary MoU dated 01.04.2018 (Annexure A-5). Table setting out computation of amount in default (Annexure A-5). Copy of Arbitration Award (Annexure A-7).
The notice of this petition was accepted by learned counsel for respondent-corporate debtor as per order dated 18.08.2021 as to why this petition be not admitted. A reply on behalf of respondent-corporate debtor is submitted vide Diary No.01959/01 dated 20.10.2021 by Mr. Neeraj Bansal, Director of corporate debtor,
The corporate debtor through its reply has submitted that the respondent-corporate debtor has faced a financial crisis due to which the Corporate Debtor is unable to pay the debts. It is further submitted that this Tribunal may consider the difficulty of the answering respondent and its incapacity to pay the liability to the petitioner.
We have heard the learned counsels for the petitioner and the respondent-corporate debtor and have also perused the record carefully.
Section 7(5)(a) of the Code is as follows:-
“5)Where the Adjudicating Authority is satisfied that— (a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application.”
The issue for consideration is whether the present application is filed within limitation. It can be seen from the records that the date of default is 01.04.2019 and the present petition is filed vide Diary No. 01959 dated 24.12.2020. Therefore, the present petition is filed within limitation.
Another issue for consideration is whether there is default in payment or not. As per Section 7 of IBC which is reproduced below :-
“Section 7 Initiation of corporate insolvency resolution process by financial creditor.
(1)A financial creditor either by itself or jointly with [other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government,] may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred. [Provided that for the financial creditors, referred to in clauses (a) and (b) of sub-section (6A) of section 21, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent. of the total number of such creditors in the same class, whichever is less: Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent. of the total number of such allottees under the same real estate project, whichever is less: Provided also that where an application for initiating the corporate insolvency resolution process against a corporate debtor has been filed by a financial creditor referred to in the first and second provisos and has not been admitted by the Adjudicating Authority before the commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the requirements of the first or second proviso within thirty days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn before its admission.] Explanation.--For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor. “
It is observed from the record that in the present case, the occurrence of default is evidenced by the copy of the loan agreement and arbitration award and the same are attached as Annexure-A-5 and Annexure-A-7 respectively of the petition. The respondent-corporate debtor has also filed a reply wherein it has been admitted that there is default in respect of financial debt and amount mentioned in the petition is due towards the petitioner and shown its incapacity to pay the liability. The application filed in the prescribed Form No.1 is found to be complete. Another condition is that there are no disciplinary proceedings pending against proposed Resolution Professional. In the present case, in Part III of Form 1, Mr. Pawan Sharma has been proposed as Interim Resolution Professional.
The Law Research Associate of this Tribunal has checked the credentials of Mr. Pawan Sharma, and there is nothing adverse against him. In view of the above, we appoint Mr. Pawan Sharma, Registration No.IBBI/IPA-002/IP-N00779/2019-2020/12463, Lok Nath 21859, Power House Road, Bathinda, Punjab-151001 Email: pawansharmairp@gmail.com, Mobile No.9814304159, the Interim Resolution Professional. The IRP is directed to take the steps as mandated under the IBC, specially under Sections 15, 17, 18, 20 and 21 of IBC, 2016.
In the given facts and circumstances, the present petition being complete and having established the default in payment of the Financial Debt for the default amount being above threshold limit, the petition is admitted in terms of Section 7(5) of the IBC. Moreso, the respondent has admitted the claim and expressed its inability to pay back the debt. Accordingly, moratorium is declared in terms of Section 14 of the Code. As a necessary consequence of the moratorium in terms of Section 14, the following prohibitions are imposed, which must be followed by all and sundry:
“(a)the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
(b)Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;
(c)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 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(d)The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the corporate debtor.
(e)It is further directed that the supply of essential goods or services to the corporate debtor as may be specified, shall not be terminated or suspended or interrupted during the moratorium period.
(f)The provisions of Section 14(3) shall, however, not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator and to a surety in a contract of guarantee to a corporate debtor.
(g)The order of moratorium shall have effect from the date of this order till completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of the corporate debtor under Section 33 as the case may be.”
The Interim Resolution Professional shall after collation of all the claims received against the Corporate Debtor and the determination of the financial position of the Corporate Debtor constitute a Committee of Creditors and shall file a report, certifying the constitution of the Committee to this Tribunal on or before the expiry of thirty days from the date of his appointment, and shall convene the first meeting of the Committee within seven days of filing the report of Constitution of the Committee. The Interim Resolution Professional is further directed to send regular progress reports to this Tribunal every fortnight.
We direct the Financial Creditor to deposit a sum of ₹2,00,000/- (Rupees Two Lakh Only) with the Interim Resolution Professional, to meet out the expense to perform the functions assigned to him in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016. The amount, however, is subject to adjustment by the Committee of Creditors as accounted for by the Interim Resolution Professional on the conclusion of CIRP.
Accordingly, petition is admitted and allowed.
A copy of the order shall be communicated to both the parties. The learned counsel for the petitioner shall deliver a copy of this order to the Interim Resolution Professional forthwith. The Registry is also directed to send a copy of this order to the Interim Resolution Professional at his e-mail address forthwith.