General Car Company (GCC) is a manufacturer of passenger cars. It sells the cars through single brand dealerships across different cities. Because of its inability to compete in the market and continuous losses, GCC has

CS Professional · Insolvency - Law and Practice · PYQS · December 2019
General Car Company (GCC) is a manufacturer of passenger cars. It sells the cars through single brand dealerships across different cities. Because of its inability to compete in the market and continuous losses, GCC has decided to exit the passenger car business and notified its dealers about shutdown of passenger car manufacturing and sales in India. Poineer Cars Ltd. is a passenger car dealer for GCC in Kanpur with an office cum showroom and having three service centers in Kanpur. Pioneer Cars Ltd. has Bank Loan from ABC Bank (B1) and DEF Bank (B2) for ₹10 Crores and ₹7 Crores respectively. The promoters cum directors of Pioneer Cars Ltd. have also given their Personal Guarantee to the bankers along with mortgage charge on the office premises cum showroom of Poineer Cars Ltd. Pioneer Cards Ltd. failed to repay the amount borrowed from the Banks. The banks have issued notice to Pioneer Cars Ltd. On receipt of the notice makes the representation that due to the present market conditions, the company is not able to repay the loan amount to the Banks. One of the Operational Creditors, M/s Radha Automobiles Private Ltd. having an outstanding payment of ₹1 Crore has filed an application to initiate insolvency process under the Insolvency and Bankruptcy Code, 2016. The NCLT has admitted the Insolvency Application and appointed Ranjeev Kumar Singh, Insolvency Resolution Professional as Interim Resolution Professional. The NCLT has declared moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. Subsequently, M/s Radha Automobiles Private Ltd. was informed by the consultant about the Fast Track Insolvency Process. M/s Radha Automobiles Private Limited want to convert the existing Resolution Process to Fast Track Corporate Insolvency Resolution Process. Poineer Cars Ltd. has contested the application for 'Conversion of the Corporate Insolvency Process' into 'Fast Track Corporate Insolvency Resolution Process'. The promoters and directors have taken a stand that Resolution Process cannot be initiated against them before the NCLT for Corporate Insolvency Resolution Process and it should be filed before Debt Recovery Tribunal. Examine whether the NCLT has power to convert the 'Corporate Insolvency Resolution Process' as a 'Fast Track Corporate Insolvency Resolution Process', under Insolvency and Bankruptcy Code, 2016 as request by M/s Radha Automobiles Ltd. Explain with the help of decided case law(s).

Answer & Explanation:

The Fast Track Corporate Insolvency Resolution Process is different from Corporate Insolvency Resolution Process. As per sub-section (2) of Section 55 of the Insolvency and Bankruptcy Code, 2016, an application for fast track corporate insolvency resolution process may be made in respect of the following corporate debtors, namely: a corporate debtor whose assets and income is below a level as may be notified by the Central Government. The corporate debtor with such class of creditors or such amount of debt as may be notified by the Central Government. Such other category of corporate persons as may be notified by Central Government. In the question the level of assets of the corporate debtor has not been given and therefore the only conclusion that can be made is that the Corporate Debtor does not come within the category of corporate debtor in terms of clauses (a), (b) or (c) of sub-section (2) of Section 55 of the Code. Therefore, section 55 of the Code cannot be invoked against the corporate debtor. The Adjudicating Authority has no power to convert Corporate Insolvency Resolution Process as Fast Track Corporate Insolvency Resolution Process under Section 55 of Insolvency and Bankruptcy Code, 2016. The NCLAT in the matter of 'Sanjay Kumar Ruia v. Catholic Syrian Bank Ltd & Anr.' held that the Adjudicating Authority has no power to convert the 'Corporate Insolvency Resolution Process' into a 'Fast Track Corporate Insolvency Resolution Process' under Section 55 of the Insolvency and Bankruptcy Code, 2016.

Topics: Fast Track Corporate Insolvency Resolution Process (FTCIRP)

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