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TMI Blog2018 (12) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... 016. The corporate applicant on such date from its Secured Creditors (e.g. mainly from PNB - who is one of the Objector in the present petition). 2. The Corporate Applicant filed the present application before this Adjudicating Authority on 28.12.2017 and provided necessary particulars about authorisation issued in favour of the authorised signatory Mr. Girish Kantilal Patel being a Director of the Corporate Applicant Company and further stated that the Board, by its Resolution dated 15.12.2017 has authorised Mr. Girish Kantilal Patel for filing the present application on behalf of the Corporate Applicant. In support thereof, the Corporate Applicant enclosed a copy of such extract of the Board Resolution dated 15.12.2017; passed in the meeting of the Board of Directors of the Corporate Debtor Company. 3. The Corporate Applicant, in the present application along with its annexures, has also provided the requisite detail about particulars of financial/operational debt creditors-wise and also proposed the name of interim Resolution Professional CA Mr. Premraj Ramrathan Laddha (IP Registration No. IBBI/IPA-001/IP-P00060/2017-18/10138 having address at 304, Abhijit-3, Above pantaloons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiation of Corporate Interim Resolution process in respect of it. It has also disclosed in the main application about legal proceedings pending against it under the SARFAESI Act and the Debts Recovery Tribunal, Ahmedabad wherein the authorized officer of the Secured Creditor i.e. PNB has taken possession of some of properties mortgaged against the loan facilities availed of. Thus, the Corporate Applicant has admitted its debt liability to the extent of Rs. 7,34,89,392.77 to the PNB by stating the reasons for making such request for initiation of CIRP which are stated as under: "During the year 2011 the corporate applicant had approached the financial creditor Punjab National Bank for sanctioning of cash credit facilities. The corporate applicant has been granted by the Punjab National Bank from time to time various credit facilities by way of financial assistance against various assets creating security interest in favour of the bank. The bank has sanctioned cash credit facility of INR 450 lacs and term loan facility of 419 lacs. Subsequently, the corporate applicant has suffered severe liquidity crisis and has become insolvent This debt has been classified by as non-perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editor has objected to such demand of the Corporate Applicant for initiation of CIRP in respect of the Corporate applicant contending that the present application is filed with mala fide intentions to stall the debt recovery proceedings initiated by the Secured Creditor before the DRT. Further, the Corporate Applicant has not filed the requisite documents along with the present application as annexures to the petition which are not in conformity with the Rule 7(i) of the IB Code and hence the present application cannot be treated as a complete one and to be rejected on such ground. It is further alleged that the Corporate Applicant Company did not file the Financial Statement and Balance Sheet before the Registrar of Companies in its statutory compliance of Section 129(2) of the Companies Act. Therefore, the Financial Statement and the Balance Sheet relied on and annexed with the present IB petition, cannot be treated as valid and proper. Hence, the application cannot be found complete. 9. It is also contended that the Corporate Applicant Company, at present, is not having any tangible assets and hence, this would be a futile exercise if CIRP is initiated in respect of the Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal in "M/s Unigreen Global Private Ltd. v. Punjab National Bank" in Company Appeal (AT) (Insolvency) No. 81 of 2017 wherein this Appellate Tribunal, taking into consideration the provisions of Section 10 of 'I & B Code', by its judgment dated 01.12.2017 observed and held as follows: "20. Under both Section 7 and Section 10, the two factors ore 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 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 due and is not payable in law or in fact They may also oppose admission on the ground that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 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. 27. It is also desirable to refer to Section 238 of the I & B Code, as quoted below: "238. Provisions of this Code to override other laws - The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." "In view of the aforesaid provision also, I & B Code shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force including DRT Act, 1993; SARFAESI Act, 2002; money suit etc." "34. Further, as we find that the Adjudicating Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumably to scuttle the proceedings before SARFAESI as the consequential moratorium imposed u/s. 14 of the Code on admission of this Petition would automatically stay/stall the proceedings vide which the personal properties of the guarantors offered as securities/collateral are not enforced or taken possession of Under the provisions of SARFAESI, guarantees can be invoked, as the liability towards the Financial Creditors would be joint and several. In the resolution process, these personal properties would neither be seized, attached nor repossessed, as the resolution professional would only be concerned about the assets of the Corporate Debtor or any immovable property in its name. The direction for imposing a moratorium would suit the directors and the guarantors perfectly from being dispossessed from their immovable properties. 11. The admission of the Petition would have a serious impact on the Financial Creditors who have already set the wheel in motion to secure their debts. The apprehension, or rather certainty, of taking away the physical possession of their valuable properties and being dispossessed appears to be the motivation for the Corporate Debtor to approach this Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicating 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 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 informations as required to be submitted in Form 6 of the Insolvency and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order has been passed in respect of Corporate Debtor, no application under Section 10 can be filed by the Corporate Applicant in view of ineligibility under Section 11 (d) of I & B Code, as quoted below: "11. Persons not entitled to make application - The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter, namely: - (a) a corporate debtor undergoing a corporate insolvency resolution process; or (b) a corporate debtor having completed corporate insolvency resolution process twelve months preceding the date of making of the application; or (c) a corporate debtor or a financial creditor who has violated any of the terms of resolution plan which was approved twelve months before the date of making of an application under this Chapter; or (d) a corporate debtor in respect of whom a liquidation order has been made. Explanation: - For the purposes of this section, a corporate debtor includes a corporate applicant in respect of such corporate debtor" 29. In view of the aforesaid provision where a winding up proceeding has already been initiated under the Companies Act, 1956/2013 by the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l informations are 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 hands 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istent therewith contained in any other law for the time being in force including DRT Act, 1993; SARFAESI Act, 2002; money suit etc. 14. Thus it has now been a well settled legal position that Section 10 of the IB Code does not empower the Adjudicating Authority to go beyond the records as prescribed under Section 10 and the information is required to be submitted in Form 6 of IB (Application to the Adjudicating Authority) Rules, 2016 subject to non-eligibility/disability prescribed under Section 11. Their Lordships further emphasised that if all information is provided by the applicant as required under Section 10 and Form 6 and if the Corporate Applicant is otherwise not found ineligible under Section 11, then the Adjudicating Authority is bound to admit such IB petition and cannot reject it on any other ground. Their Lordships further pleased to observe in Paras 22 and 23 of the Judgment that any fact not related or beyond under the IB Code or found prescribed in Adjudicating Authority Rules (Form 6 in the present case) are not required to be stated or supplied. Non-disclosure of any fact not related to Section 10 and Form 6 cannot be termed to be suppression of facts or to hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant thus it has not properly authorised a person as an Authorised Signatory for filing the present application and further the relevant documents relating to shareholders' agreements are not filed in support of the present application, hence the present application is liable to be treated as incomplete. 18. We carefully examine these issues involved in the present application in order to deal with the same. We place reliance on the above stated judgment of the Hon'ble Supreme Court in the matter of Innoventive Industries Ltd. (supra). The relevant Para of judgment is reproduced herein below: "58. There can be no doubt, therefore, that the Code is a Parliamentary law that is an exhaustive code on the subject matter of insolvency in relation to corporate entities, and is made under Entry 9, List III in the Seventh Schedule which reads as under: "9. Bankruptcy and Insolvency" 59. On reading its provisions, the moment initiation of the corporate insolvency resolution process takes place, a moratorium is announced by the adjudicating authority vide Sections 13 and 14 of the Code, by which institution of suits and pending proceedings, etc. cannot be proceeded with. This cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any instrument having effect by virtue of any such law." It is clear that the later non-obstante clause of the Parliamentary enactment will also prevail over the limited non-obstante clause contained in Section 4 of the Maharashtra Act. For these reasons, we are of the view that the Maharashtra Act cannot stand in the way of the corporate insolvency resolution process under the Code." 19. By above decision, the Hon'ble Supreme Court categorically described the scope and limit to deal with such application filed under Sections 7, 9 and 10 of the IB Code. Therefore, this Adjudicating Authority is bound by the same. As the Hon'ble Supreme Court in Para 58 this Judgment has already held such that there can be no doubt that the Code is a Parliamentary Law that is an exhaustive code on the subject matter of bankruptcy in relation to corporate entities and further it is having overriding effect under Section 238 of the Code and it is an exhaustive code, therefore, proceedings under the Insolvency and Bankruptcy Code, 2016 could not be stalled due to pendency of some other statutory proceedings. 20. Therefore, by relying upon the above stated Judicial Precedents of the Hon'ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted as an Interim Resolution Professional however subject to confirmation to be received from IBBI with regard to pendency of any disciplinary proceedings or otherwise against him after receipt of a confirmation from the IBBI. The formal order of his appointment as IRP to be issued. Thereafter, the IRP is required to take all the needful actions and steps under Section 15 of the Code by causing public announcement of initiation of the Corporate Insolvency Resolution Proceedings in respect of Corporate Applicant, M/s. Vaman Fabrics Private Limited. The IRP shall also take further steps to comply with the provision made under Sections 15, 17, 18, 20 and 21 of the Code and to take follow-up action for constitution of a Committee of Creditors (under Section 21 of the IB Code) within the stipulated period from the date of his of appointment as an IRP (under Section 16 of the Code after receiving a confirmation from the IBBI). 25. The Corporate Applicant being the Corporate Debtor is bound to and is hereby directed to extend all cooperation to the IRP under the provision of Section 19(1) of the IB Code. 26. The Section 13 of the IB Code, 2016 further stipulate that, after admission of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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