- (1.) This is an application which has been filed by M/s. Rave Scans Pvt. Ltd. u/s. 10 of the Insolvency and Bankruptcy Code, 2016 (hereinafter for the sake of brevity called 'IBC') and under Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, initiating corporate insolvency resolution process by the Corporate Debtor itself. The details of the Corporate Debtor is given in Form 6 of the prescribed format which contains following particulars of the corporate applicant, namely the applicant seems to have been incorporated on 27.03.2002 with the Registrar of the Companies NCT and Haryana and having been allotted with CIN No. U22190DL2002PTC 114722. The authorised Share capital as well as the Paid-up Capital presently of the Applicant is disclosed as Rs. 14 cr. It is further represented by the applicant that the company has presently the following financial creditors, namely: and to all the above named it is claimed by the applicant that the Corporate Debtor owes substantial sums. It is also disclosed that in addition to financial creditors, the company also owes amounts to operational creditors in a sum of Rs. 13,65,49,293.39 as on 31.12.2016. The applicant claims that presently the company has in its Board of Directors two, namely Mr. Bhavnesh Kumar Kanwar and Mr. Rakesh Kumar Bhatnagar, both having been appointed on 27.03.2002 and as of today continuous to be in the Board. The applicant further states that even though in the two years prior to filing of this application, there were five Directors including the two mentioned above, subsequently Mrs. Anuradha Bhatnagar, Mr. Gaurav Chatterjee as well as Mr. PremNath Arora have resigned from the Board and are not part of the management of the company any more. The applicant has also mentioned the name of the Interim Resolution Professional proposed as Mrs. Ritu Rastogi, a registered insolvency professional with the Insolvency and Bankruptcy Board of India, having Registration No. IPA-01/2016-17/IP-00151. The Insolvency Professional named as Interim Resolution Professional has also filed an acceptance, to act as Insolvency Resolution Professional, provided an order admitting the instant application is passed, as well as declaring inter alia that she is eligible to be appointed as a resolution professional in respect of the Corporate Debtor in accordance with the provisions of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 as well as has also declared that there is no disciplinary proceedings which are pending against her with the Board or ICAI or insolvency professional agency. Further, it is also declared by the said insolvency professional that presently she is not handling any interim resolution process, resolution process or as a liquidator in any proceedings. The acceptance of the declaration has been made by the insolvency professional in Form No. 2 dated 07.01.2017, duly signed by the insolvency professional (IP). At the time of moving the above said application, the counsel appearing for the applicant represented that in the event of default committed in respect of payment of the debt owed to the financial creditors who are also secured creditors of the Corporate Debtor/Applicant, some of the Secured Creditors have issued notices under Section 13(2) of the SARFESI Act 2002 and these notices have been issued by the following secured creditors namely Indian Overseas Bank, Bank of Baroda and Punjab National Bank and the said notices have been annexed to the application itself. The extract of the relevant books of accounts of the Corporate Debtor pertaining to the above three secured creditors as well as in relation to three financiers of the company who have been namedit is represented have also been filed by way of financial information. In addition to the above the counsel for the applicant also represented that copies of the Corporate Debtors' financial statement for the preceding two financial years, namely 2014-15 and 2015-16 have been made as Annexure to its application. Further, the provisional financial statement for the current financial year made upto 31.12.2016 duly attested by the Directors of the company have also been filed, for the consideration of this Tribunal. Learned Counsel also represents that with respect to the assets of the company, the charges created against the same in favour of the secured creditors of the company along with date of creation as well as date of modification along with the particulars relating to date of satisfaction, if any have also been filed which shows that in relation to Banks the charges have not been satisfied. The particulars regarding shareholding list of the company along with the names and address of the shareholders it is claimed by the counsel for the applicant have also been filed. During the course of hearing it was represented by the counsel for the applicant that the applicant company had moved on 01.09.2015 a reference u/s. 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 for declaring the company as a sick company and that on 14.09.2015, the said reference made by the applicant company have also been registered before the BIFR as Case No. 116/2016 which evidences that the applicant company has not been able to service its debt and that the networth of the company has eroded as represented by the learned counsel that since Sick Industrial Companies (Special Provisions) Act, 1985 has been repealed and BIFR has been abolished, the applicant company being the Corporate Debtor does not have any other recourse than approaching this Tribunal under the above provisions of IBC for restructuring and hence has sought to invoke, by virtue of this application the jurisdiction of this Tribunal and in view of the same, the Tribunal may initiate the corporate insolvency process as contemplated in IBC and also to confirm the Interim Resolution Professional as proposed by the applicant. At this stage, it is pertinent to point out that the matter was called on 13.01.2017. There was no representation on behalf of the applicant and hence Tribunal was forced to adjourn the matter to 16.01.2017. On perusal of the application, as taken through by the counsel for the applicant, certain omissions/deficiencies were noticed on 16.1.2017. The Tribunal vide its orders dated 16.01.2017 as well as 18.01.2017 directed the applicant to comply with the same. The purpose for approaching the Tribunal by way of this application u/s. 10 of the IBC is stated to be that the Applicant company-Corporate Debtor intends to restructure its activities and for which purpose even though it has approached the secured creditors, principally the public sector banks, they have not favourably considered for such a restructure proposal as the Corporate Debtor/applicant is yet to receive any concrete response from the banks but on the other hand have slapped the applicant company with the notices under SARFESI Act. The Corporate Debtor represented by the learned counsel also submits that the slump in the business basically arose due to working capital shortage as well as the faulty installation of a machinery purchased from a world renowned German conglomerate and manufacturer, namely Heidelberg, along with their Indian counterpart and the machinery costing approximately Rs. 14 cr. although took nearly three months to install, the said machinery failed to perform the functions for which it was bought. Since the machinery as mentioned above was not able to be accommodated due to lack of space in the factory owned by the Corporate Debtor at their Naraina or at Gurgaon, the applicant/Corporate Debtor was forced to lease out on rent the premises to accommodate the said machinery imported from outside India for which the company has to incur a recurring expense of Rs. 23.7 lacs per month. It is further stated that because of the above said factors, the Corporate Debtor suffered heavy losses amounting to Rs. 27.23 cr. and the applicant company was not able to fulfill its confirmed orders, as the raw-material such as papers and inks were spoiled as the company is predominantly engaged in printing business and is contemplating of initiating legal action against the manufacturer and its Indian counterpart. The applicant company, it is stated was a profit making and tax paying company till 2014 and as on date even though the networth has eroded, is a going concern having on its pay roll 278 permanent employees and other contractual labourer and if allowed to function as a going concern can revive itself with additional finances with the support of banks. The applicant company is presently hard pressed for working capital need which it is not able to meet due to freezing of their account by the banks and the accumulated expenses pending for payment for the present month i.e. January, 2017 approximate to Rs. 2,61,26,921 as per details furnished with the note circulated by the Counsel for Applicant. Taking into consideration all the above aspects and since the company is a going concern as defined u/s. 20 of the IBC, it is submitted that it is a fit case for corporate resolution process being initiated as contemplated under the IBC. The Interim Resolution Professional named in the application is also personally present before us and submitted that she is willing to act as such and is fully aware of duties enjoined on her under IBC and relevant rules framed thereunder and that she will act in the best interest of all the stakeholders while in office as such. We have carefully considered the submissions of the applicant/Corporate Debtor who itself has initiated the process for insolvency resolution. However, before going into the merits of the application it is incumbent on this Tribunal to satisfy itself of the bona fide of the application as well as the jurisdiction to entertain such an application filed by the applicant/Corporate Debtor. The object and reasons for bringing into force the IBC seems to be as follows:- "An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto." Pursuant to the above said objects, IBC 2016 (Act No. 31 of 2016) as approved by both the Houses of Parliament, the Government of India seems to have notified the provisions relating to Corporate Insolvency including Section 10 under which the present application has been filed on 30.11.2016 vide Notification S.O. 3591 (E) : MANU /DCAF/0143/2016 and the said notification to take effect on and from 01.12.2016. While through the above said notification, Section 4 to Section 32 as well as Section 60 to Section 77 and other relevant provisions have been notified relating to Corporate Insolvency, vide Notification No. S. 6 3687(E), the Central Government has notified that provisions of Section 33 to Section 54 of the IBC have come into force w.e.f. 15.12.2016. The definition clauses of IBC, save certain clauses which are not material in relation to matter in hand have also been notified vide Notification No. S.O. 3355(E) : MANU /DCAF/0133/2016 dated 01.11.2016 to come into effect on the said date. However, provisions relating to fast track corporate insolvency as well as voluntary liquidation of corporate persons are yet to be notified as contained in Section 55 and 59 and as such we are not concerned as in the instant case it is not relevant. The Insolvency and Bankruptcy Board of India (Board), as contemplated under the IBC have been constituted and consequent to its constitution, the Insolvency and Bankruptcy Board of India (Board) have framed Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016, vide notification IBBI/2016-17/GN/REG004 dated 30.11.2016 with effect from 01.12.2016. Prior to the above regulations relating to Insolvency Resolution for corporate persons, the Board have notified other significant regulations in exercise of its powers, namely Insolvency and Bankruptcy Board of India (Insolvency Professional Agencies) Regulation 2016 notified vide IBBI/2016-17/GN/REG002 dated 21.11.2016, as well as Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulation, 2016 vide Notification No. IBBI/2016-17/GN/REG003 dated 23.11.2016 coming into force on 29.11.2016. In exercise of the powers conferred by both the Companies Act, 2013 and as well IBC 2016 (31 of 2016), the Central Government has notified the designated Benches of the NCLT to exercise its jurisdiction, powers and authority of the Adjudicating Authority conferred by or under Part II of the IBC relating to Corporate Insolvency vide Notification No. 3591(E) : MANU /DCAF/0143/2016 dated 30.11.2016 to come into effect from 01.12.2016 and simultaneously have also notified vide G.S.R. 1108(E) : MANU /DCAF/0142/2016 dated 30.11.2016, the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 to come into effect from 01.12.2016 and which Rules prescribes the procedure and forms in relation to the IBC which are required to be adopted. By virtue of the abovesaid Notifications issued by the Central Government it is evident that this Tribunal is solely vested with authority to exercise its jurisdiction in relation to Corporate Insolvency Resolution Process, save voluntary liquidation proceedings as contemplated Under Section 59 of the Code which is yet to be notified. Further, vide Notification G.S.R. 1119(E) : MANU /DCAF/0145/2016 issued by the Ministry of Corporate Affairs dated 07.12.2016 and to take effect from 15.12.2016, proceedings in relation to winding up pending before High Courts at the stages specified therein are alone to be retained before the concerned High Courts. Since the instant application does not, as such deals with the aspect of winding up, the said Notification may not be relevant for our purposes. The detailing of the various Notifications issued by the concerned authorities prescribed under the respective statute as above becomes necessary and crucial for the purpose of adjudication of the present application keeping in mind the avowed objects of the IBC, 2016. The provisions of Section 10 of IBC under which the instant application is filed is extracted as hereunder: (1) Where a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating corporate insolvency resolution process with the Adjudicating Authority. (2) The application under sub-section (1) shall be filed in such form, containing such particulars and in such manner and accompanied with such fee as may be prescribed. (3) The corporate applicant shall, along with the application furnish the information relating to-- (a) its books of account and such other documents relating to such period as may be specified; and (b) the resolution professional proposed to be appointed as an interim resolution professional. (4) The Adjudicating Authority shall, within a period of fourteen days of the receipt of the application, by an order-- (a) admit the application, if it is complete; or (b) reject the application, if it is incomplete: Provided that Adjudicating Authority shall, before rejecting an application, give a notice to the applicant to rectify the defects in his application within seven days from the date of receipt of such notice from the Adjudicating Authority. (5) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (4) of this section. The above provision of IBC Code discloses that the following procedures are required to be completed by a Corporate Debtor in initiating the process of insolvency: i) Existence of a Corporate Debtor. ii) Such a Corporate Debtor must have committed a default. iii) On the satisfaction of (i) and (ii) above a Corporate Applicant may file an application for initiating Corporate Insolvency Resolution Process. iv) Such an application as contemplated in (iii) above shall be filed in such forms, containing such particulars and in such manner and accompanied with such fee as may be prescribed. v) Along with the application as in (iv) above, information relating to books of accounts and other documents relating to such period as may be specified. vi) The Applicant to name the Resolution Professional proposed to be appointed as an Interim Resolution Professional. Section 10 of the IBC confers a discretion on this Tribunal to either admit or reject the application on this Tribunal and in case of rejection to give an opportunity to the applicant before such rejection to rectify the defects within seven days from the date of receipt of such notice from the Adjudicating Authority. The term "Corporate Debtor" has been defined under Section 3(8) of Part - I of the Code to mean a Corporate Person who owes a debt to any person and 'default' is defined Under Section 3(12) of Part - I of the Code to mean "non-payment of debt when whole or any part or installment of the amount of debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the case may be". The term 'Corporate Applicant' is also defined under Section 5(5) of the IBC, 2016 as follows: (a) corporate debtor; or (b) a member or partner of the corporate debtor who is authorised to make an application for the corporate insolvency resolution process under the constitutional document of the corporate debtor; or (c) an individual who is in charge of managing the operations and resources of the corporate debtor; or (d) a person who has the control and supervision over the financial affairs of the corporate debtor; In the instant case, both the 'Corporate Debtor' and the 'Corporate Applicant' are one and the same person and it is seen that the applicant is a Corporate Entity as evidenced by the Constitutional Documents of the applicant filed along with the application. Further as per the statement made by the counsel at the time of representation it is stated that the applicant was only involved in BIFR proceedings and that no liquidation order has been made against it and hence in the circumstances the applicant cannot be considered as a person not entitled to make application as specified in Section 11 of IBC. The conjoint reading of 'Corporate Debtor' and 'Corporate Applicant' as extracted above also discloses that the Corporate Debtor can itself put in motion its own Insolvency Resolution Process by filing an application. In relation to the existence of default the applicant has filed the notices issued by some of the Secured creditors, being Public Sector Banks Under Section 13(2) of the SARFESI Act against which it is represented that the Applicant has not made payments in satisfaction of the said notices resulting in default and have also not approached the concerned DRT for any other remedies. Going further the term 'Corporate Insolvency Resolution Process' though not defined under IBC, 2016, is seen to be defined in Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 to mean "the insolvency resolution process to corporate persons under Chapter II of Part II of the Code" and under which part the instant application is seen to have been filed. The forms and particulars to be contained in application as well as the manner of filing and the fee required to accompany the application seems to have been prescribed in the rules termed under Insolvency and Bankruptcy (Application of Adjudicating Authority) Rules, 2016 and as per the said Rules the form to be adopted is Form 6 therein by a Corporate Applicant and particulars and documents as specified therein are required to be filed by the Applicant. Since we have already dealt in detail in the opening paragraphsof this order relating to information furnished, we are not repeating the same for sake of brevity, as the essential particulars as contemplated has been provided by the Applicant in the application filed earlier, on 10.01.2017, as well as the additional particulars provided vide filing by the Applicant of the Paper Book on 20.01.2017 as directed by this Tribunal. In relation to information relating to books of accounts, audited financial statements have been filed for preceding two years for the year ended 31.03.2015 and year ended 31.03.2016 and unaudited financial statement for the period made upto 31.12.2016. The Schedule of Creditors, both secured and unsecured has been made upto 31.12.2016 attested by a director of the applicant company. The applicant in the application has also named the Interim Resolution Professional as required under the IBC the application being an application made by a Corporate Debtor, in compliance with Section 12 of the Code and whose name has already been mentioned in paragraph supra. It is evident from the additional typed set filed by the Applicant that the Interim Resolution Professional named by the Applicant is formally registered with the insolvency and Bankruptcy Board of India which is evidenced by the Certificate issued by the said Board along with IP Registration No. 1BB1/IPA-001/IP-00151/2016-17/1247 under the hand of Deputy General Manager of the said Board. The Interim Resolution Professional named in the application has duly filed Form No. 2 as prescribed under the Insolvency and Bankruptcy (Application to Adjudication) Rules, 2016 in which the declaration as required to be made to the effect that no disciplinary proceedings are pending against her, which is a pre-requisite as per Section 16 of the Code has also been made. A perusal of the financial information filed for the period ended 31.03.2015 and 31.03.2016 as well as for the period ended 31.12.2016 discloses the following:- Reserves and Surpluses indicating erosion of net worth to the extent of following:- Long term borrowings and other liabilities discloses the following for the above years:- Current Liabilities:-
(2.) The above figures indicate steady erosion of networth but on the other hand an increase in borrowings thereby contributing to further erosion in net worth due to payment of financial cost which the Applicant Company is not able to service due to fall in revenue earned from operations as evidenced from the financial statements: Revenue From Operations
(3.) The figures extracted as above only indicates further erosion of networth what with continuing fall in the operations of the Applicant Company as it seems to have fallen into a debt trap and thereby a candidate for setting in motion the Insolvency Resolution Process as contemplated under IBC and as sought for by the Corporate Debtor who itself as given above is the Applicant. The applicant company save some sketchy particulars has not given any road map as to how it is going to keep itself afloat as a going concern. However, keeping in perspective the objects for which IBC has been brought into force and to balance the interest of all stakeholders we are satisfied that the instant application warrants to be admitted to prevent further erosion of capital and to safeguard the assets of the Applicant Company/Corporate Debtor. For the reasons aforementioned while admitting the Application we issue the following directions:- (i) Appoint Mrs. Ritu Rastogi, a Practicing Chartered Accountant and Registered Insolvency Professional as the Interim Resolution Professional as contemplated under Section 16 of the IBC and her term of appointment shall be for a period of thirty days from the date of this order or as may be determined by the Committee of Creditors whichever is earlier; (ii) In terms of Section 17 of the IBC, from the date of her appointment the powers of the Board of Directors shall stand suspended and the management of the affairs shall vest with the Interim Resolution Professional and the;