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Judgment
ORDER
[PER: SANJIV DUTT, MEMBER (TECHNICAL)]
1. BACKGROUND
This is an Application filed on 22.09.2021 by Vizag Agriport Private Limited, (hereinafter referred to as “the Corporate Applicant/Company”) under Section 10 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code”) read with Rule 7 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as “the AAA Rules”) through Mr. Jay Benham, Authorised Representative of the Corporate Applicant for initiation of Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) of the Corporate Applicant.
The Corporate Applicant was incorporated on 11.04.2012 to carry on the business of designing, planning, operating and maintaining Mechanised Fertilizer handling Facilities at Eastern Quay – 7 (“EQ-7”) Berth in the Inner Harbour of Vishakhapatnam Port for handling of Dry Bulk cargoes on Design, Build, Finance, Operate and Transfer (“DBFOT”) basis.
The Corporate Applicant is a 74:26 Joint-Venture between ALBA Asia Private Limited and IL&FS Maritime Infrastructure Company Limited (hereinafter collectively referred to as “JV Partners”). It was awarded a 30 year concession vide the Concession Agreement dated 18.05.2012 to design, finance, build and operate a fertilizer-import terminal in the Port of Visakhapatnam in the State of Andhra Pradesh (“the Project”).
During the initial five years of the Project i.e., from Financial Years 2012-13 to 2016-17, the Corporate Applicant incurred heavy expenditure and subsequently sustained heavy losses. A consultation meeting was held between the Board of Trustees of Vishakhapatnam Port Trust and the Corporate Applicant on 17.02.2016, wherein both the parties decided to terminate the project by mutual consent. Accordingly, Deed of Mutual Cancellation was executed on 21.02.017.
Due to closure of business operations, the Corporate Applicant has defaulted in payment of its dues of Rs.2,23,42,486/- owed to the Operational Creditors. There are no fixed assets and no dues to any financial creditors. Further, Statement of Assets and Liabilities and names and addresses of creditors of the Corporate Applicant have been annexed to the Application.
A Board Resolution of the Corporate Applicant was passed on 30.05.2020 to initiate CIRP of the Corporate Applicant by making an Application under Section 10 of the Code. The Shareholders of the Corporate Applicant in their Extra-Ordinary General Meeting held on 23.06.2020 passed the resolution approving the filing of Application under Section 10 of the Code. Further, the Corporate Applicant affirms that it is not disentitled under Section 11 of the Code from filing an Application to initiate CIRP.
The NCLT, Mumbai Bench-I in the matter of an Application filed by M/s. Infrastructure Leasing & Financial Services Limited (“IL&FS”) for seeking approval of the NCLT to initiate CIRP of the Corporate Applicant, being a Group Company of IL & FS, under Section 10 of the Code, amongst other matters involving other group companies of IL & FS, has approved the same vide its Order dated 01.06.2021 in CA No 17/2021, in CP No. 3638/MB/2018.
The Corporate Applicant has prepared Audited Financial Statements for the two years i.e., Financial Years 2019-20 and 2020-21, and the provisional Financial Statements for the Financial Year 2021-22 as on 27.08.2021, which also brings out the default to creditors. As per the Audited Financial Statement as on 31.03.2021, the Company has a negative balance in statement of profit and loss of Rs.22,91,54,937/- as against paid up share capital of Rs.22,83,00,000/-. This clearly indicates complete erosion of net worth of the Company. Further, on account of termination of the aforesaid Project and consequent loss of stratum, the Company defaulted on its various outstanding debts. In view of above facts and circumstances, it is prayed that the Application filed by the Corporate Applicant to commence insolvency may be admitted.
The Corporate Applicant has suggested the name of Mr. Anshul Pathania having Registration No.IBBI/IPA-001/IP-P01529/2019-2020/12461 for appointment as the Interim Resolution Professional (“IRP”). The proposed IRP has given his Consent in Form 2 confirming his eligibility stating that there are no disciplinary proceedings pending against him.
2. ANALYSIS AND FINDINGS
We have heard the Ld. Counsel appearing for the Corporate Applicant and perused the documents placed on record and the extant provisions of the Code and the law.
As per Section 10 of the Code, where a corporate debtor has committed a default, a corporate applicant thereof may file an application before the Adjudicating Authority for initiating CIRP. The Application is to be filed in the prescribed Form-6. Along with the Application, the corporate applicant is required to furnish the following particulars/documents:-
a. The information relating to its books of account and such other documents for such period as may be specified;
b. The information relating to the resolution professional proposed to be appointed as an interim resolution professional; and
c. The special resolution passed by shareholders of the Corporate Debtor or the resolution passed by at least three-fourth of the total number of partners of the Corporate Debtor, as the case may be, approving filing of the application. As per Section 10(4), the Adjudicating Authority shall by an order admit the application if the same is complete and no disciplinary proceeding is pending against the proposed resolution professional.
Further, the settled legal position with regard to the mandate of Section 10 and the role of the Adjudicating Authority in this regard has been brought out by the Hon’ble NCLAT in the matter of Unigreen Global Private Limited Vs. Punjab National Bank & Ors. [CA (AT) (Ins.) No.81 of 2017] 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”. ………………………………………………..
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 as 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 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.”
In view of the above legal principles, it is now proposed to deal with the present Application. First and foremost, it is observed that the Corporate Applicant has annexed a copy of the order dated 01.06.2021, passed by NCLT (Mumbai Bench-I) in CA No.17/2021 in CP No.3638/MB/2018. Upon perusal of said order, it is noted that an Application dated 11.11.2020 was filed by IL&FS Limited before Hon’ble Mr. Justice D. K. Jain (Retd.), who was engaged to supervise the operation of the Resolution Process of IL&FS Group, seeking approval to initiate CIRP for the Corporate Applicant. Subsequently, by letter dated 27.11.2020, Hon’ble Mr. Justice D. K. Jain (Retd.) granted approval for the initiation of CIRP of the Corporate Applicant under Section 10 of the Code. Pursuant thereto, the NCLT Mumbai Bench-I, vide aforesaid order dated 01.06.2021 permitted IL&FS Limited to take appropriate steps under law to initiate CIRP of the Corporate Applicant in the present case.
We have also taken note of the chronology of events starting from the award of Concession Agreement dated 18.05.2012 to the Corporate Applicant; termination of the said Agreement vide Deed of Mutual Cancellation dated 21.02.2017 due to change in economic circumstances; incurring of heavy expenditure by the Corporate Applicant between 2012 and 2017 and sustaining of substantial losses in the process. On perusal of the audited Financial Statements of the Corporate Applicant as on 31.03.2021, it is observed that there was a negative balance of Rs.22.91 crores in statement of profit and loss and the net worth of the Company had completely eroded. In view of closure of business operations, the Corporate Applicant had defaulted in its payment obligations to various Operational Creditors.
It is observed that the Corporate Applicant has submitted a general affidavit along with the Application declaring that there are no outstanding dues payable to any Financial Creditors. In this regard, the Corporate Applicant has provided a "No Dues Certificate" dated 06.12.2019 from the State Bank of India on behalf of State Bank of Hyderabad.
The Corporate Applicant availed various services from different Operational Creditors since its incorporation. Copies of outstanding invoices from four Operational Creditors have been placed on record: (i) IL&FS Trust Company Limited, for an amount in default of Rs.5,37,617/-; (ii) IL&FS Financial Services Limited, for an amount in default of Rs.1,75,89,707/-; (iii) J Sagar Associates, for an amount in default of Rs.1,32,279/-; and (iv) HOWE (India) Private Limited, for an amount in default of Rs.40,82,881/-The Corporate Applicant has annexed to the Application a few letters from some Operational Creditors demanding payment of the outstanding invoices. However, there is no evidence on record indicating that the Corporate Applicant has made any payments to its Operational Creditors.
The Corporate Applicant has annexed to the Application the Special Resolution passed by its members at the Extra-Ordinary General Meeting held on 23.06.2020, wherein it was resolved that in view of insignificant business operations in the company for the last so many years and the default committed in repayment of debt due to inadequate resources to fulfil payment obligations, the Corporate Applicant is unable to repay its debts, thereby necessitating the initiation of CIRP under Section 10 of the Code.
Further, a perusal of Audited Financial Statements of the Corporate Applicant as on 31.03.2021 reveals that the Corporate Applicant had generated no income from operations and had accumulated losses of over Rs.22.91 Crore. The Audited Financial Statements for the financial year 2020-21 also substantiate the default to creditors, with trade payables amounting to Rs. 2,23,42,486/-.
All these clearly demonstrate that the Corporate Applicant is in default of a debt due and payable and the default exceeds the minimum threshold stipulated under Section 4(1) of the Code. We find that present Application is filed as per Rule 7 of the AAA Rules in Form 6 and is complete in all respects. Thus, we are satisfied that the default stands established and the Corporate Applicant has been able to make out a case for initiation of CIRP under Section 10 of the Code. The Corporate Applicant has proposed the name of Mr. Anshul Pathania, Insolvency Professional, Registration No: IBBI/IPA-001/IP-P-01529/2019-2020/12461 to act as the Interim Resolution Professional (IRP). The Corporate Applicant has placed on record the written consent of the IRP in Form 2 along with the registration certificate.
In view of aforesaid facts and circumstances, this Bench is of the considered view that the present Application is fit for admission under Section 10 of the Code for directing initiation of CIRP against Vizag Agriport Private Limited, the Corporate Applicant.
ORDER
I. In view of the aforesaid findings, the present Application bearing CP(IB)No.1081/(MB)/2021 is hereby admitted and initiation of Corporate Insolvency Resolution Process (CIRP) is ordered against Vizag Agriport Private Limited, the Corporate Applicant.
II. This Bench hereby appoints Mr. Anshul Pathania (anshul.pathania@gmail.com), Insolvency Professional, Registration No: IBBI/IPA-001/IP-P01529/2019-2020/12461 having valid Authorisation for Assignment up to 31.12.2025 as the interim resolution professional to carry out the functions as mentioned under the Code. The IRP shall carry out functions as contemplated by sections 15, 17, 18, 19, 20 and 21 of the Code.
III. We declare Moratorium in terms of sub-section (1) of Section 14 of the Code with consequential directions as mentioned below. We prohibit;-
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;
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 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002;
The recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor.
IV. Notwithstanding the above, during the period of moratorium: -
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;
That the provisions of sub-section (1) of section 14 of the Code shall not apply to
such transactions as may be notified by the Central Government in consultation with any financial sector regulator or any other authority;
A surety in a contract of guarantee to a corporate debtor.
V. The moratorium shall have effect from the date of this order till the completion of the CIRP or until this Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 of the Code or passes an order for liquidation of Corporate Debtor under section 33 of the Code, as the case may be.
VI. Public announcement of the CIRP shall be made immediately as specified under section 13 of the Code read with regulation 6 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
VII. During the CIRP Period, the management of the Corporate Debtor shall vest in the IRP or, as the case may be, the RP in terms of Sections 17 or 25, as the case may be, of the Code. The suspended directors, officers, managers and employee of the Corporate Applicant shall provide all documents in their possession and furnish every information in their knowledge to the IRP within a period of one week from the date of receipt of this Order, in default of which coercive steps will follow.
VIII. The Corporate Applicant shall deposit a sum of Rs. 3,00,000/- (Three Lakh Rupees) by way of demand draft drawn in favour of the IRP towards the initial CIRP cost arising out of issuing public notice and inviting claims. These expenses are subject to approval by the Committee of Creditors (CoC). The fee payable to IRP/RP shall be compliant with Regulations, Circulars and Directions issued by the Insolvency & Bankruptcy Board of India (IBBI) as may be applicable.
IX. The Registry is directed to communicate this Order to the Corporate Applicant and the IRP by Speed Post and email immediately.
X. A copy of this Order be sent to the Registrar of Companies, Mumbai, Maharashtra, for updating the Master Data of the Corporate Applicant. The said Registrar of Companies shall send a compliance report in this regard to the Registry of this Court within seven days from the date of receipt of a copy of this order.