Super Ltd. is engaged in the business of producing auto ancillary products and has a plant near Mumbai. As per the latest audited financial statements the turnover of Super Ltd. was ₹200 crore and investment in plant and

CS Professional · Insolvency - Law and Practice · PYQS · June 2023
Super Ltd. is engaged in the business of producing auto ancillary products and has a plant near Mumbai. As per the latest audited financial statements the turnover of Super Ltd. was ₹200 crore and investment in plant and machinery was ₹35 crore. Turnover and investment in plant and machinery never crossed ₹200 crore and ₹35 crore respectively. Due to reduction in the demand of the products by the auto companies, Super Ltd. started facing financial difficulties. It evaluated many options for rescuing the business and discussed on multiple occasions with the lenders. In one of the consortium meeting, lenders decided to take action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). During the said meeting one of the lenders holding 30% share in the consortium suggested that in the present circumstances it would be apt to proceed under the provisions of the Insolvency and Bankruptcy Code, 2016 (the Code) since the Code is one of the effective tools for resolution of the debt. However, due to the difference in opinion amongst the lenders few of them decided to move ahead under the SARFAESI and others decided to file an application under the Code. Legal counsel of Super Ltd. intervened and informed that once proceedings are initiated under both the laws, SARFAESI being an old law will prevail and the lenders may be in a position to quickly recover their outstanding dues. Considering the circumstances, Rohan, promoter of Super Ltd. suggested to provide one last chance to Super Ltd. to submit a resolution plan for its revival and requested the lenders to consider the Pre-Packaged Insolvency Resolution Process. Rohan is now fully active in the business and making all possible attempts for revival of Super Ltd. and Duper Ltd. (wholly owned subsidiary of Super Ltd.) which is also classified as non-performing asset for last 5 years. On the option given by Rohan, one of the lenders informed that law relating to Pre-Packaged Insolvency Resolution Process is still at a nascent stage and may take years to complete. In response, Rohan clarified that it may not take years, since the process of filing an application is very simple and no documents are required to be attached to the application. Therefore, the adjudicating authority will be in a position to quickly consider and dispose off the case. Consider the above facts and answer the following questions: (iv) Whether the contention of Rohan is correct that no documents are required to be furnished along with the application?

Answer & Explanation:

The contention of Rohan that no documents are required to be furnished along with the application for Pre-Packaged Insolvency Resolution Process (PPIRP) is not correct . Section 54C of the Insolvency and Bankruptcy Code, 2016, clearly specifies the documents that the corporate applicant must furnish along with the application for initiating PPIRP: Declaration and Approvals: The declaration, special resolution or resolution (as applicable), and the approval of financial creditors for initiating PPIRP, as required under Section 54A. Insolvency Professional's Consent and Report: The name and written consent (in the specified form) of the Insolvency Professional (IP) proposed to be appointed as Resolution Professional (RP), as approved under Section 54A(2)(e), along with the IP's report as referred to in Section 54B(1)(a). Declaration on Avoidance Transactions: A declaration regarding the existence of any transactions of the corporate debtor that may fall within the scope of avoidance provisions (Chapter III) or fraudulent/wrongful trading (Chapter VI), in a specified form. Financial Information: Information relating to the books of account of the corporate debtor and such other documents relating to such period as may be specified. These requirements demonstrate that the application process for PPIRP is not as simple as Rohan suggests, and significant documentation is mandatory to ensure transparency and compliance with the Code.

Topics: Pre-Packaged Insolvency Resolution Process (PPIRP)

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