Adjudicating Authority Bound to Initiate CIRP if Application u/s.10 is Complete and There is No Ineligibility u/s.11: NCLT [Read Order]

A Division Bench of the National Company Law Tribunal at Chennai held that when an application under Section 10 of the Insolvency and Bankruptcy Code is deemed complete and the corporate applicant does not stand disqualified by any of caveats of Section 11, the Adjudicating Authority is bound to admit the petition and initiate the Corporate Insolvency Resolution Process (CIRP).

The present petition was filed by Venus Star Chit Pvt. Ltd., under section 10 of the IBC, asserting their default and insolvency.

The petitioner, incorporated on August 14, 2013 had availed an overdraft facility from Tamil Nadu Mercantile Bank which was cleared by December 2019 after which it ceased operations, and disclosed total liabilities amounting to ₹2,80,86,784 in its petition.

The company also produced a document containing details of the securities held, date of their creation and their estimated value, copy of ledger statement of the outstanding financial debt as on 15.02.2020 and copy of Form AOC-4 filed with the Ministry of Corporate Affairs (MCA), along with their financial statements up to March 31, 2024 as directed by the Tribunal.

It was submitted that the Board of Directors on May 3, 2024, resolved to file the Section 10 application and authorised the managing director to do so. The petition further recorded that several receivables were time-barred and that the company lacked the requisite assets to meet its liabilities.

The petitioner was represented before the NCLT by Veera and Vedhavel. The counsel for the petitioner submitted that there was no material indicating the petitioner's disqualification from seeking such an application under Section 11 of the Code and that none of the creditors filed any objection towards the same.

The Bench of Sanjiv Jain, Member (Judicial) and Venkataraman Subramaniam, Member (Technical) examined the provisions of section 10 of the IBC. The Tribunal further referenced the decision of the NCLAT, New Delhi in M/s. Unigreen Global Private Limited vs. Punjab National Bank and others (2017) and Go Airlines(India) Limited (2024 TAXSCAN (NCLT) 141) to hold that when an application under Section 10 is complete and no ineligibility under Section 11 exists, the adjudicating authority is bound to admit the company petition.

Accordingly, the Tribunal admitted the petition, initiated CIRP and appointed Rongali Sridevi as the Interim Resolution Professional with requisite directions, including directions to seek police assistance to retrieve relevant information if the corporate debtor was non-cooperative.

The NCLT also imposed a moratorium under Section 14, setting out statutory restrictions on suits, transfers, and enforcement actions.

Additionally, the Tribunal directed the corporate applicant to pay a sum of ₹5,00,000 to the IRP to meet the related expenses while admitting the petition.

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