Section Of The Companies Act Section 10 Of The Insolvency And Bankrupcy Code v. Idbi Bank Ltd. & Ors

Bikki Raveendra Babu, Judicial Member: Order pronounced in open Court. Vide separate sheet.

2.M/s. Gujarat Oleo Chem Limited filed this Petition under Section 10 of the Insolvency and Bankruptcy Code, 2016 [hereinafter referred to as the Code] read with Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 [hereinafter referred to as the Rules].

3.The Applicant is the Company registered under the Companies Act. The Applicant had filed Reference under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 [SICA for short] with BIFR on 28.12.2006 vide Case No. 5 of 2007 based on Audited Balance Sheet as on 30thJune, 2006. The said Reference was dismissed by the BIFR on 16.5.2007 on the ground that the Company had approached the BIFR with unclean hands and manipulated accounts.

4.This Applicant filed an Appeal before the Honble AAIFR against the order of the BIFR dated 16.5.2007. The Honble AAIFR vide its order dated 20thSeptember, 2012 set aside the order dated 16.5.2007 and remanded the matter to BIFR to conduct a Special Investigation Audit under Section 16 of the SICA and directed that on the basis of Special Investigation Audit Report, the BIFR would take appropriate action in the matter in accordance with law.

5.During the pendency of the appeal before AAIFR, this Applicant filed another Reference before the BIFR vide Case No. 61 of 2011. The Reference No. 61 of 2011 was clubbed with Reference No. 5 of 2007. Ultimately, BIFR on 19.11.2013 dismissed both the References with an observation that Applicant was not interested in pursuing the aforesaid References and wants to enjoy the protection under SICA. This Applicant preferred an Appeal before the AAIFR against the order of the BIFR dated 19.11.2013. The Honble AAIFR, vide its order dated 5.5.2014 set aside the order of the BIFR dated 19.11.2013. In the Reference pending before BIFR, Oriental Bank of Commerce had to submit Special Investigation Audit Report. The IDBI filed Miscellaneous Application No. 557/14 requesting the BIFR to await the Reference. The IDBI on behalf of Secured Creditors of the Company taken over possession of the secured assets of the Corporate Applicant in terms of the Securitisation Act. In the light of repealing of SICA with effect from 1.12.2016, no further proceedings took place before the BIFR on 29.11.2016.

6.According to the Applicant, in view of the Eight Schedule of the Insolvency and Bankruptcy Code, 2016 there was amendment to the Sick Industrial Companies (Special Provisions) Repeal Act, 2003. As per the said amendment, in Section 4, for sub-clause (b), new clause was substituted and as per the new clause the proceedings before the BIFR shall stand abated. The Proviso to Section 4 says, that the company in respect of which Reference is abated may make Reference to National Company Law Tribunal under the Insolvency and Bankruptcy Code within 180 days from the commencement of the Insolvency and Bankruptcy Code. The another Proviso to the amended Clause(b) says, that no fee is payable for making Reference under the Insolvency and Bankruptcy Code in case the Reference of the Company before BIFR is abated.

7.That is how this Petition is filed by the Corporate Applicant under Section 10 of the Code read with Rule 7 of the Rules before this Adjudicating Authority. This Petition was filed before this Adjudicating Authority on 2ndFebruary, 2017 but it was represented on 30thMarch, 2017. This Petition was listed for hearing before the Bench of this Adjudicating Authority on 5.4.2017.

8.This Adjudicating Authority, on 5.4.2017, directed the Applicant to rectify certain mistakes and list the matter again on 12.4.2017. The Corporate Applicant sent notices to all the Financial Creditors and Operational Creditors by Speed Post as per the order of this Adjudicating Authority. On 12.4.2017, none appeared before this Adjudicating Authority on behalf of the Creditors.

9.Heard the arguments of the learned Advocate appearing for the Corporate Applicant. The summary of Financial Creditors filed by the Applicant shows the amount in default to the Creditors as Rs. 4,879.63 Lakhs. The material on record placed by the Corporate Applicant show that it has committed default. The Applicant comes within the meaning of Corporate Debtor as defined in Section 5(a) of the Code. The Corporate Applicant, along with the Petition, furnished the information as required under clause(a) and (b) of sub-section(3) of Section 10 of the Code. The Corporate Applicant filed the Petition under sub-section(1) in the prescribed form. The Corporate Applicant also proposed the name of the Resolution Professional. The Corporate Applicant also filed written communication of proposed Interim Insolvency Resolution Professional in Form-2.

10.Hence the Petition filed by the Corporate Applicant is admitted under Section 10(4)(a) of the Code.

11.Section 13 of the Code enjoins upon the Adjudicating Authority to exercise its discretion to pass an order to declare a moratorium for the purposes referred to in Section 14, to cause a public announcement of the initiation of corporate insolvency resolution and call for submission of claims as provided under Section 15 of the Code. Sub-section(2) of Section 13 says that public announcement shall be made immediately after the appointment of Interim Resolution Professional.

12.Hence, CA Shri. Rakesh Chaturvedi, having Reg. No. IBBI/IPA-001/IP-00234/2016-2017/1336 and residing at Paresh Rakesh & Associates, 103, Namrata CHS, Bldg. No. 15, Shastri Nagar, Link Road, Goregaon West, Mumbai-400104, is appointed as Interim Resolution Professional who filed Form-2 and Certificate of Registration issued by the Insolvency and Bankruptcy Board of India. This Adjudicating Authority also directs the Corporate Applicant to make a public announcement in terms of Clause(b) of sub-section(1) of Section 13.

13.In the case on hand, it appears that the Reference made by the Applicant Company was pending before the BIFR as on 29.11.2016. The said proceedings stand abated in view of Eight Schedule of Section 252 of the Code. It appears that the Applicant has enjoyed the protection order during the pendency of proceedings before the BIFR. It appears from the Affidavit of the Corporate Applicant that IDBI has taken possession of the secured assets of the Corporate Applicant in terms of the Securitisation Act.

14.In view of the commencement of the Insolvency Resolution Process with the admission of this Petition and appointment of the Interim Resolution Professional, this Adjudicating Authority hereby passes the order declaring moratorium under Section 13(1)(a) prohibiting the following as laid down in Section 14 of the Code;

(i) 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;

(ii) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;

(iii) 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 Act, 2002 (54 of 2002);

(iv) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

(a) However, the supply of goods and essential services to the corporate debtor shall not be terminated or suspended or interrupted during moratorium period. The moratorium order in respect of (i), (ii), (iii) and (iv) above shall not apply to the transactions notified by the Central Government.

15.This order of moratorium shall be in force from the date of order till the completion of Corporate Insolvency Resolution Process subject to the Proviso under sub-section(4) of Section 14.

16.This Petition is ordered accordingly.

17.Communicate a copy of this order to the Corporate Applicant and to the Interim Insolvency Resolution Professional.