Allowed

In the matter of Rsv Earth Enterprises Private Limited [Cp (Ib) No.52-ALD-2021]

NCLT15 Sept 2023CP (IB) No.52-ALD-2021

Case brief

AI extract

What is this about?

NCLT Prayagraj admitted an application under Section 9 of the I&B Code initiated by an operational creditor against a corporate debtor. The court rejected defenses based on Section 10A moratorium and invoice authenticity, noting TDS and ITC records confirmed the debt, and appointed an IRP.

What did the court decide?

Application admitted under Section 9(5); Moratorium declared under Section 14; IRP Mr. Anurag Nirbhaya appointed; IRP directed to deposit Rs.1,00,000.

In the matter of Rsv Earth Enterprises Private Limited… — Insolvency and Bankruptcy | NCLT (2023)

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IN THE NATIONAL COMPANY LAW TRIBUNAL ALLAHABAD BENCH, PRAYAGRAJ

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CP (IB) No.52/ALD/2021

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An application under Section 9 of the Insolvency & Bankruptcy Code, 2016 read with Rule 6 of Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016

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IN THE MATTER OF:

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M/S. METRO MINES & MINERALS CO. A-703, Katyayni Apartments, Plot No. 8, Sector-6, Dwarka, New Delhi-110 075 Through its proprietor Mr. Pradeep Kumar

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...Applicant/Operational Creditor

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Versus

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M/S RSV EARTH ENTERPRISES PRIVATE LIMITED Registered office: 12, Alipur, Gijuauri, Post Chanderu, Bulandshahr, Uttar Pradesh …Respondent/Corporate Debtor

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Order pronounced on 15^th September, 2023

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CORAM:

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Sh. Praveen Gupta : Member (Judicial) Sh. Ashish Verma : Member (Technical)

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PRESENT-

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Sh. Parveen Kumar Aggarwal, Adv. : For the Operational Creditor Sh. Uttiyo Mallick alongwith Sh. : For the Corporate Debtor Robin Singh Sirohi, Advs.

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Page 1 of 21

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CP (IB) No.52/ALD/2021

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ORDER

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1. The instant application is filed on 12.08.2021 by M/s Metro Mines & Minerals Co. (hereinafter referred as ‘ Applicant’/ ‘Operational Creditor’ ) under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as the “ I & B Code, 2016 ”) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred as “ the Rules ”). The prayer made therein is to initiate Corporate Insolvency Resolution Process (hereinafter referred as ‘ CIRP ’) in respect of M/s RSV Earth Enterprises Pvt. Ltd. (hereinafter referred as ‘ Respondent’/ ‘Corporate Debtor’ ) due to default in payment of total outstanding amount of Rs.1,39,62,900/- (Rupees One Crore Thirty-Nine Lakh Sixty-Two Thousand Nine Hundred only).

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2. Briefly stated facts of the present case as averred by the Applicant/Operational Creditor in its application filed in Form5 containing part I, II, III, IV & V are that:-

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i. The Operational Creditor is involved in the business of construction and allied works. The Operational Creditor

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Page 2 of 21

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CP (IB) No.52/ALD/2021

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was approached by the Corporate Debtor to undertake earthwork and embarkment of road for the

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Respondent’s project, i.e. Purvanchal Expressway Project package- VI. The Applicant completed the work and raised invoices for the same amounting to Rs.1,93,56,800/-

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ii. It is pointed out by the Operational Creditor that though the Corporate Debtor failed to pay the aforesaid amount but it did deposit TDS at a rate of 1%, totaling Rs. 1,70,900, with the Income Tax Department as partial payment for the aforementioned invoices. It also claimed Input Tax Credit from the GST department for these invoices.

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iii. The Corporate Debtor subsequently made partial payments of Rs. 52,23,000/- in addition to the previously mentioned TDS deposit of Rs.1,70,900 but failed to settle the remaining balance. Consequently, there is an outstanding amount of Rs. 1,39,62,900/(One Crore Thirty-Nine Lakh Sixty-Two Thousand and

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Nine Hundred Rupees) for these invoices. Further, it is Page 3 of 21

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CP (IB) No.52/ALD/2021

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stated by the Operational Creditor that as per the customary terms of sale and market practice, the corporate debtor is obligated to pay interest at the rate of 18% per annum on the overdue amount.

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iv. Considering the above facts and circumstances, the applicant/Operational Creditor issued a Statutory Notice dated 22.12.2020 under Section 8 of the Code, instructing the corporate debtor to clear the outstanding unpaid amount within 10 days of receiving the Notice.

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v. The corporate debtor received the demand notice on 15.01.2021 and replied vide letter dated 18.01.2021, which has been considered by the Operational Creditor as a vague and evasive reply. The applicant subsequently issued a response on 19.04.2021 to the aforesaid reply by corporate debtor. However, no payment yet has been made by the corporate debtor.

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3. The Respondent/Corporate Debtor has submitted its reply stating that the present Insolvency and Bankruptcy petition has

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been filed by M/s Metro Mines & Minerals Co., falsely Page 4 of 21 CP (IB) No.52/ALD/2021

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representing itself as an Operational Creditor of the Respondent in question. The following contentions have been raised in the reply of the Respondent pleading for the dismissal of this petition:

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i. The present application is not maintainable since it is covered under Section 10A of the Code which states that no application under section 7, 9 and 10 shall be filed for any default arising between 25.03.2020 to 25.03.2021. The last part-payment of Rs.52,23,000/- (as alleged by Applicant) made by Respondent to Applicant was on 22.03.2020

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ii. The Respondent further states that no operational debt is owed by him to Applicant since the invoices placed in the application are not on record and are not genuine. The GST rates specified are different despite both the invoices sharing the same date. Invoice no. 117 and 118 share the same date, March 31, 2019. However, in invoice 117, the Applicant has indicated Central GST at a rate of 9% and State GST at 9%. However, in invoice 118, both of these taxes are mentioned at a rate of 6% each

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iii. The respondent also states that the ledger accounts, relied

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on by the Applicant seems fabricated since they do not bear any signatures and are neither confirmed by Respondent.

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iv. The Form 26AS (appended as Annexure A-5 to the petition) shows that a TDS deduction of Rs.1,70,900/(One Lakh Seventy Thousand and Nine Hundred Rupees only) has been made against an 'Amount Paid/Credited' of Rs. 1,70,90,000/- (One Crore Seventy Lakhs and Ninety Thousand Rupees only) for a single transaction that occurred on March 31, 2019. This amount is notably different from Rs.1,93,56,800/- (One Crore Ninety-Three Lakhs Fifty-Six Thousand and Eight Hundred Rupees only) claimed by the Applicant/Operational Creditor under the four invoices produced as evidence.

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v. It's important to note that the Applicant has not provided any document indicating that the Corporate Debtor is obligated to make interest payments. Even the invoices, which appear to be false and fabricated, do not mention

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any liability for interest, let alone interest at a rate of 18% Page 6 of 21

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per annum.

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vi. It is further submitted that, as established by the Hon'ble NCLT, Chandigarh in the case of M/s Wanbury Ltd. v. M/s Panacea Biotech Ltd . [C.P. No.8/2019/RT

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No.9/CHD/PB/2017], this Hon'ble Tribunal lacks the authority to determine interest in the absence of a clear agreement between the parties to pay interest. As a result, the Applicant/Operational Creditor cannot assert a claim for interest as a matter of right, as is being asserted in the Application.

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4. The Operational Creditor filed a rejoinder countering all the contentions raised in the reply filed by the Corporate Debtor and made the following averments:

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i. It’s evident from the records that the initial defaults took place on 31.01.2019, 28.02.2019, and 31.03.2019, when the invoices were raised after the Operational Creditor had completed the work. Subsequently, additional defaults occurred on various dates between 07.03.2020, to 22.03.2020, when the Corporate Debtor made partial payments amounting to Rs.52,23,000/against the Page 7 of 21 CP (IB) No.52/ALD/2021

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aforementioned invoices but failed to settle the entire outstanding amount.

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ii. The Applicant has relied upon the judgement of the Hon'ble NCLAT in Ramesh Kymal vs. M/s. Seimens Gamesa Renewable Power Private Limited [Company Appeal (AT)

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(Ins) No. 701 of 20201 wherein it held:

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"10. It is significant to notice that the embargo on filing of applications under Sections 7, 9 & 10 for initiation of CIRP of a Corporate Debtor for default arising on or after 25th March, 2020 for the specified period would not apply in regard to default committed prior to 25th March,2020. "

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iii. It is emphasized once again that the Corporate Debtor has not only claimed Input Tax Credit (ITC) from the GST department based on the mentioned invoices but has also deposited a TDS amount of Rs. 1,70,900/- against these invoices. Therefore, it is not valid for the Corporate Debtor to dispute the existence of these invoices. It is argued that when the Corporate Debtor has availed ITC benefits for these disputed invoices, it cannot now assert that these

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invoices were not sent to or received by them, especially Page 8 of 21

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without raising any objections regarding the execution of the work related to these invoices.

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iv. Furthermore, it's worth noting that the TDS amount of Rs. 1,70,900/-, calculated at a rate of 1%, was specifically deposited under Form 26AS against these same invoices.

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v. It is also pointed out that the parties involved have indeed

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mutually agreed upon interest payments. This is further supported by the fact that the Corporate Debtor, in its response, has acknowledged making interest payments to the Operational Creditor on previous occasions (as stated in paragraph 17 (d) of the reply), and this acknowledgment was based on an oral agreement. Additionally, it's a common practice in the market to apply an interest rate of 18% per annum. The decision of the Hon'ble Chandigarh Bench, which the Corporate Debtor has relied upon, is distinguishable based on the specific facts of that case, and

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it does not apply to the circumstances and facts of the present matter.

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Findings and Conclusion

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5. We have considered the submissions made by the Ld. Counsels for the parties and perused the records.

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6. The issues for consideration before this Tribunal is whether this petition filed by the petitioner is time barred by limitation and whether the claim of the operational debt made by the Operational Creditor is correct or not and in this respect there is any pre-existing dispute.

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7. The ledger maintained by Operational Creditor clearly shows that an amount of Rs.7,93,000/- was paid by the corporate debtor to Operational Creditor on 22.03.2020 and an amount of Rs.1,39,62,900/- remained unpaid. The fact that Corporate Debtor continued making payments till 22.03.2020 is also acknowledged by the Corporate Debtor in its reply in paragraph 13 on page 7.

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8. Thus, the initial defaults occurred on January 31, 2019, February 28, 2019, and March 31, 2019, when the invoices were raised following the completion of the work by the Operational Creditor. The Corporate Debtor thereafter, made partial payments totaling to Rs. 52,23,000/- on various days between Page 10 of 21 CP (IB) No.52/ALD/2021

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March 7, 2020, and March 22, 2020 and the petition being filed on 12.08.2021, makes the petition admissible. The bar of Section 10A does not apply as the period of section 10A started on 25.03.3020 and ended on 25.03.2021 and the due date default i.e. 22.03.2020 clearly does not fall during this period.

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9. The next issue for consideration is whether the invoices raised are genuine and there exists an unpaid operational debt. The Corporate Debtor raised doubts on the authenticity of the invoices since 3 out of 4 invoices had CGST and SGST charges of 6% each whereas one invoice had charges of 9% as CGST and SGST respectively.

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10. The Corporate debtor in its reply also stated that there was a discrepancy in amounts since Form 26AS appended to the petition as Annexure A-5 shows that an amount of Rs.1,70,90,000/- was shown as credited/paid under one transaction but aggregate amount of the four invoices placed on record is Rs.1,93,56,800/-. It has also been contended by the Corporate Debtor that it has only taken loans from the Applicant /Operational Creditor for which “ RSV Earth Enterprises Pvt.

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Ltd. (Loan A/c) ” was being maintained by the Operational Page 11 of 21 CP (IB) No.52/ALD/2021

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Creditor (annexed at pg 37 to 38 of the application) and it can be seen from this loan account that this account was squared off after repaying the entire loan amount.- However, it is alleged by the Corporate Debtor that petitioner has very cleverly divided this ledger account in two heads i.e. Project A/c and Loan A/c and shown the “loan account” as squared off and in “the project account” , an outstanding amount of Rs. 1,39,62,000/- has been shown. It is also stated that the Corporate Debtor was itself doing sub-contract work of earth work of Purvanchal Expressway and the petitioner/Operational Creditor has falsely and vexatiously alleged that the Corporate Debtor has subcontracted the same to the petitioner/Operational Creditor and in terms thereof, certain invoices were raised by the Operational Creditor totalling to a sum of Rs. 1,93,56,800/-. This contention of the Corporate Debtor is not found correct as in the Form 26AS of the Operational Creditor issued by the Income Tax Department, it is clearly shown that TDS has been deducted by the Corporate Debtor on the amount credited/paid to the Operational Creditor under section 194C of the Income

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Tax Act @ 1/%, which is deducted by the payer (i.e. the main Page 12 of 21 CP (IB) No.52/ALD/2021

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contractor) for payment due to sub-contractor on payment or on being credited in his account, whichever is earlier. Therefore, the Operational Creditor is found correct as submitted by it in its application u/s 9 that it did sub-contract work for the Corporate Debtor for which bills were raised as mentioned in the section 9 application, out of which operational debt of more than Rs. 1 crore is outstanding.

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11. The very fact that the Respondent deposited a TDS amount of Rs.1,70,900/- against the said invoices and also availed Input Tax Credit shows his acknowledgement of the operational debt by its own conduct. Even if total amount of invoices is taken at Rs.1,70,00,000/- as admitted by the Corporate Debtor in its Form No. 26AS, the outstanding amount after taking into account the payment of Rs. 52,23,000/- would come well above the threshold limit of Rs.1 crore as prescribed under the Code. Thus, we found that though amount of debt is disputed but the undisputed amount is well above the threshold limit of Rs. 1 crore. Thus, the very fact that operational debt of an amount exceeding Rs. 1 crore exists and is unpaid, makes this petition

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fit for admission u/s 9 of the I&B Code, 2016. Page 13 of 21 CP (IB) No.52/ALD/2021

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12. We find that the debt against the goods supplied with respect to the invoices raised by the Operational Creditor falls within the definition of Operational Debt u/s 5(21) of the I & B Code, 2016. The Operational debt is defined u/s 5(21) of the Code to mean “a claim in respect of provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority”. The invoices against which the debt is outstanding are raised for construction of earthen road and construction of embarkment which will come under the category of for providing goods as well as services, hence would qualify for the operational debt. Thus, we find that there exists an operational debt duly established by the records produced during the hearing of the case, the dispute raised by the Corporate Debtor in this respect has not been found to be correct and there is default in payment of this debt on the part of the Corporate Debtor.

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13. Taking into account the provisions of Section 9 of the I & B

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Code, 2016, we find that the application made under subPage 14 of 21 CP (IB) No.52/ALD/2021

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section (1) of Section 9 along with documents and fees as mentioned in its sub-section (2) is complete. The payment of the unpaid operational debt has not been made which is well above the threshold limit of Rs.1 crore. The date of default as per petition has been found to be 22.03.2020 when last payment was made by respondent. The petition u/s 9 is filed on 12.08.2021, hence, petition is found to have been filed well within the limitation period. In terms of section 9(3) of I & B Code 2016, the Operational Creditor has provided a copy of invoice demanding payment and demand notice given to the corporate debtor for payment of goods supplied. Therefore, after finding that all the conditions for admission of application under Section 9(5)(i) of the I & B Code 2016 against the Corporate Debtor, has been fulfilled and the Ld. Counsel of the Corporate Debtor has failed to demonstrate before us anything about there being any pre-existing dispute as regards the payment of the operational debt, we find this application fit for admission under Section 9(5) of the I & B Code, 2016 for starting CIRP against the Corporate Debtor, RSV Earth Enterprises.

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14. The Operational Creditor has proposed the name of Mr. Anurag Nirbhaya as the IRP in the present application. The written consent by IRP has been on record by way of affidavit bearing diary no. 623 dated 09.011.2022. Hence, this adjudicated Authority appoints Mr. Anurag Nirbhaya as the IRP in the present case, having Registration No. IBBI/IPA-001/IPP00870/2017-2018/11468, R/o 204, Sagar Plaza, Plot No. 19, District Centre, Laxmi Nagar,New Delhi,National Capital Territory of Delhi, 110092, Email- [email protected]. The verification of the said IRP has been carried out by Law Research Associate of this Tribunal, Aditi Kharbanda, and it is found that there is no proceeding pending against the proposed IRP. Upon verification from the website of IBBI, it is found that IRP holds valid authorization till 01.06.2024.

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15. Accordingly, this application is admitted u/s 9(5) of I & B Code, 2016 under the following terms and conditions.

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i. The application filed by the Operational Creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016 for initiating the Corporate Insolvency Resolution Process

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against the Corporate Debtor i.e. RSV Earth Enterprises Pvt. Page 16 of 21 CP (IB) No.52/ALD/2021

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Ltd. is hereby admitted.

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ii. We hereby declare a moratorium u/s 14 and public announcement in accordance with Sections 13 and 15 of the I & B Code, 2016.

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iii. This Adjudicating Authority hereby appoints Mr. Anurag Nirbhaya as IRP as discussed in para 14 above.

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iv. The IRP shall cause a public announcement of the initiation of the Corporate Insolvency Resolution Process and call for the submission of claims under Section 15. The public announcement referred to in clause (b) of sub-section (1) of Section 15 of the Insolvency & Bankruptcy Code, 2016 shall be made immediately.

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v. Moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 prohibits the following: -

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a) The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; Transferring, encumbering, alienating or disposing of by the Corporate Debtor Page 17 of 21

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any of its assets or any legal right or beneficial interest therein ;

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b) Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);

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c) The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor.

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vi. The supply of essential goods or services rendered to the

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Corporate Debtor as may be specified shall not be terminated, suspended, or interrupted during the moratorium period.

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vii. The provisions of sub-section (1) of Section 14 of I & B Code,

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2016 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.

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viii. The IRP shall after collation of all the claims received

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against the Corporate Debtor and the determination of the financial position of the Corporate Debtor constitute a Committee of Creditors and shall file a report certifying the constitution of the Committee to this Tribunal on or before the expiry of thirty days from the date of his appointment, and shall convene the first meeting of the Committee within seven days of filing the report of Constitution of the Committee.

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ix. The Committee of the Creditors shall appoint a Resolution Professional as per section 22 of I & B Code, 2016. A monthly progress report shall be filled by the Resolution Professional providing the details of work done in respect of completing the CIRP within the time line as prescribed under the provision of section 12 of the I & B Code, 2016.

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x. The order of moratorium shall have effect from the date of

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admission till the completion of the Corporate Insolvency Resolution process.

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xi. However, at any time during the Corporate Insolvency Resolution Process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of the Corporate Debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.

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xii. The Interim Resolution Professional should convene a meeting of the Committee of Creditors and submit the resolution passed by the Committee of Creditors and shall identify the prospective Resolution Applicant in accordance with I & B Code, 2016 read with the relevant rules & regulation framed thereunder.

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xiii. The Operational Creditor/Applicant is directed to deposit Rs.1,00,000/- (One Lakh Only) with the IRP appointed hereinabove within two weeks from this order. IRP can claim the preliminary expenses and fees subject to approval by the CoC and after the constitution of the CoC.

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16. Registry is hereby directed to communicate the order to the Operational Creditor, the Corporate Debtor, the IRP and the jurisdictional Registrar of Companies by Speed Post as well as through email.

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17. List the matter on 17.10.2023 for filing of the first monthly progress report.

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18. Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities.

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19. Ordered accordingly

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(Ashish Verma) Member (Technical)

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(Praveen Gupta) Member (Judicial)

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Aditi Kharbanda (LRA)