Richa Infrastructure Limited engaged in the construction of roads is in default in repayment of loans due to general slowdown in construction industry. Repeated follow-up by the financial institutions with the Corporate

CS Professional · Insolvency - Law and Practice · PYQS · December 2019
Richa Infrastructure Limited engaged in the construction of roads is in default in repayment of loans due to general slowdown in construction industry. Repeated follow-up by the financial institutions with the Corporate Debtor, 'Richa Infrastructure Ltd.' for submitting its specific plan for repayment of dues did not evoke any response. One of the financial creditors filed a case against Richa Infrastructure Ltd. before the Debt Recovery Tribunal. Richa Infrastructure Ltd. had issued some cheques to some Operational Creditors. All the cheques issued to creditors were dishonored/returned by the banker due to insufficient funds in the account. Consequently, Operational Creditors issued legal notices to Richa Infrastructure Ltd, with clear intimation that if due amount is not paid within 15 days from the date of receipt of legal notice, criminal complaint shall be filed against Richa Infrastructure Ltd. under the Negotiable Instrument Act, 1881 and criminal complaints were filed. After a joint lenders meeting, all the financial institutions unanimously decided to apply under the provisions of the Insolvency and Bankruptcy Code, 2016 to the National Company Law Tribunal (NCLT) for starting the process of Insolvency Resolution. Their application was admitted by NCLT on 30th June, 2018 and orders were issued for commencement of a moratorium period of 180 days, appointment of an Interim Resolution Professional and issue of public announcement inviting claims from all concerned. After public announcement and the responses thereto, following details were brought out: (1) Financial debts due to unsecured creditors (F1) - ₹15 Crores. (2) Workmen's due for the period of 24 months preceding the liquidation commencement date (F2) - ₹25 Crores. (3) Debts due to a secured creditor who has relinquished his security (F3) - ₹30 Crores. (4) Amount due to the Central Government (F4) - ₹27 Crores. (5) Debts due to a secured creditor after the enforcement of security interest (F5) - ₹36 Crores. Insolvency Resolution Professional (IRP) approached the promoters, directors and officials of Richa Infrastructure Ltd to provide the necessary information, documents, statutory records, books of accounts to verify the claims filed by creditors. The promoters, directors and officials of Richa Infrastructure Ltd. ignored the request of Resolution Professional. M/s ANG & Associates, Chartered Accountants were the Statutory Auditors of Richa Infrastructure Ltd. They audited the accounts for the financial year end March, 2018 of Richa Infrastructure Ltd. and submitted the Annual Accounts for approval of the Board of Directors. The Resolution Professional has appointed valuers and has received the valuation reports. The Resolution Professional then started the efforts to get resolution proposals. However during the normal resolution process period of 180 days, no resolution proposal could be finalized. The Committee of Creditors decided that Resolution Professional should get the extension as per the provisions of Insolvency and Bankruptcy Code, 2016. Based on the above facts, answer the following questions: Can a Financial Creditor proceed against a Corporate Debtor under the Insolvency and Bankruptcy Code, 2016, when the matter is already pending before the Debt Recovery Tribunal ? Examine the issue with the help of decided case law/laws.

Answer & Explanation:

Section 238 of the Insolvency and Bankruptcy Code, 2016 (the Code) provides that 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. National Company Law Tribunal (NCLT), Ahmadabad Bench, in the case of 'Sarthak Creations Pvt. Ltd. v. Bank of Baroda & Others' held that the pendency of proceedings before Debt Recovery Tribunal (DRT) is no ground for not to commence Corporate Insolvency Resolution Process (CIRP) in view of non-obstante clause under Section 238 of the Insolvency and Bankruptcy Code, 2016. In the case of 'PR Commissioner of Income Tax, New Delhi vs. Monnet Ispat & Energy Ltd.' , the Delhi High Court held that the moratorium period under Section 14 of the Code announced by the National Company Law Tribunal would also apply to the order of the Income Tax Appellate Tribunal in respect of the tax liability of the assessee. Upholding the Delhi High Court Judgment ( 'PR Commissioner of Income Tax, New Delhi vs. Monnet Ispat & Energy Ltd.' ) which held that moratorium under the Insolvency and Bankruptcy Code (IBC) will apply to the order of Income Tax Appellate Tribunal, the Supreme Court has observed that IBC will override anything inconsistent contained in any other enactment, including the Income Tax Act, 1961. In view of the above, a financial creditor can initiate proceedings under the Code even if the matter is already pending before DRT.

Topics: Corporate Insolvency Resolution Process (CIRP)

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