2018 (2) TMI 684 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - existence of default - Held that - The total amount of debt granted and disbursed has been elaborately explained and for further details reference has been made to Annexure A-2 which shows that CC facility was given by disbursing Rs. 7 crores on 04.04.2017. Another facility described as LC4 A/cs account Rs. 50 crores was given and the amount was disbursed on 02.03.2015. Likewise the amount of default has also been elaborately given along with the dates which can be ascertained by referring to Annexure A-3. Therefore we do not find any substance in the objection raised by the Corporate Debtor. Another objection raised by the Corporate Debtor is that the petition was not maintainable without joining the lead Bank would not detain us as Section 7 of the Code itself shows that a financial creditor either by itself or jointly with other financial creditor may file an application for initiating Corporate Insolvency Resolution Process against a Corporate Debtor when a default has occurred. Therefore there is no obligation to join the lead Bank. A certificate of registration dated 14.09.2017 issued to Mr. Gian Chand Narang by the Insolvency and Bankruptcy Board of India has been placed on record vide aforesaid diary number.According to the declaration made by Mr. Gian Chand Narang no disciplinary proceedings are pending against him nor he is a related party to Financial Debtor namely NCML Industries Limited nor he is an employee of the NCML Industries Limited. Accordingly he satisfies the requirement of Section 7(3)(b) of the Code. Thus this petition is admitted

Summary

Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Details and evidence of financial debt and default.
3. Objections raised by the Corporate Debtor.
4. Appointment of Insolvency Professional.
5. Declaration of moratorium and its implications.

Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Financial Creditor, Central Bank of India, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against NCML Industries Limited. The application was supported by a power of attorney dated 08.09.2016.

2. Details and Evidence of Financial Debt and Default:
The Financial Creditor provided comprehensive details of the financial debt granted to the Corporate Debtor. The debt included a fresh working capital limit (FLC) of Rs. 40 crores extended on 17.09.2012, which was subsequently renewed and increased to Rs. 50 crores on 13.11.2013, along with an additional CC (Hypothecation) limit of Rs. 7 crores. The principal amount in default under the CC limit as of 25.07.2017 was Rs. 9,93,34,797, and the default amount under the LC development was Rs. 47,03,02,370. The Financial Creditor also presented overwhelming evidence, including various deeds of guarantee, hypothecation agreements, and a record of default from Credit Information Companies.

3. Objections Raised by the Corporate Debtor:
The Corporate Debtor opposed the application, arguing that it was incomplete and lacked statutory details required in part IV of the prescribed form. However, the Tribunal found that the Financial Creditor had provided all necessary details, including the total amount of debt granted, dates of disbursement, amount claimed to be in default, and dates of default. Another objection was that the petition was not maintainable without joining the lead bank. The Tribunal dismissed this objection, stating that Section 7 of the Code allows a financial creditor to file an application either by itself or jointly with other financial creditors. The Tribunal also referenced Section 238 of the Code, which provides that the provisions of the Code prevail over any other law, including the Banking Regulation Act.

4. Appointment of Insolvency Professional:
The Financial Creditor initially proposed the name of Mr. Anil Kohli as the Insolvency Professional but later requested to replace him with Mr. Gian Chand Narang. The Tribunal accepted this request, noting that Mr. Narang was duly registered with the Insolvency and Bankruptcy Board of India and met all requirements under Section 7(3)(b) of the Code. Consequently, Mr. Gian Chand Narang was appointed as the Interim Resolution Professional (IRP).

5. Declaration of Moratorium and Its Implications:
The Tribunal declared a moratorium in terms of Section 14 of the Code, imposing prohibitions on:
- The institution or continuation of suits or proceedings against the Corporate Debtor.
- Transferring, encumbering, alienating, or disposing of any assets of the Corporate Debtor.
- Foreclosing, recovering, or enforcing any security interest created by the Corporate Debtor.
- Recovering any property occupied by the Corporate Debtor.
The moratorium does not apply to transactions notified by the Central Government or the supply of essential goods or services to the Corporate Debtor. The IRP was directed to perform all functions as per the Code, and all personnel connected with the Corporate Debtor were legally obligated to cooperate with the IRP.

Conclusion:
The petition was admitted, and the Tribunal directed the IRP to make a public announcement regarding the admission of the application under Section 7 of the Code. The Tribunal emphasized the IRP's duty to protect and preserve the value of the Corporate Debtor's property and manage its day-to-day affairs. The office was directed to communicate a copy of the order to the Financial Creditor and the Corporate Debtor within seven days.