Moot Proposition – 6th Zenith Internal Moot Court Competition, 2021
6th Zenith Internal Moot Court Competition, 2021
Moot Proposition
Stark Enterprises is a booming tech company which is into providing a variety of services
dealing with designs, information technology, cloud services, server security, third party
server security, digital vaults, payment security services, blockchain, online banking
gateways, hacker protection services, etc.
Stark Enterprises has its reach everywhere and in every major company in India. A few of its
clients are:
a. Wiggy (a company that provides food delivery services and cloud kitchen services),
b. Cromato (another company that provides food delivery services and cloud kitchen
services)
c. Cabber (A transport sharing platform),
d. Archer Industries (a government defence company).
These are just to name a few.
In the year 2012, Stark Enterprise was incorporated in the garage of Mr. ShaSha Stark in a
small locality in Titan, which is in the country of Paradisia. Mr. ShaSha Stark was an
incredibly gifted coder and an exceptionally good strategist.
However, Mr. ShaSha Stark was known for being insensitive and for having a high temper
around those who he thought were subordinate to him. Unfortunately, this behaviour even
showed its way to those who are already established Goliaths. This behaviour was seen as an
attempt to disturb the existing power balance and there was a clash of egos.
Stark Enterprise has seen a steady growth up till the year 2015. It had multiple contracts with
multiple companies looking for tech solutions but, that was until trouble began brewing in
early 2018s. It was during this time that Stark Industries started experiencing mild hacker
attacks and the company brushed it off thinking that it was common for any tech/cyber
security company to face such attacks. This ignorance costed them heavily. Word in the
market is that the established giants who hated Mr. Shasha stark’s audacity, hired multiple
hackers to bombard Stark Enterprise with cyber-attacks. By the time there could be any
remedy, most of the information in possession of the company was already out and available
on the dark net.
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Moot Proposition – 6th Zenith Internal Moot Court Competition, 2021
Sensing foul play, Mr. ShaSha stark filed a criminal complaint against all the tech giants in
the country, only for the investigating authorities to conclude there was no evidence of foul
play. In the meantime, the image of the company started taking a hit and the rating of the
company as a technology service provider started taking a dip.
Most of the clients of Stark Enterprises realised that their information was compromised and
were pulling the plug to file suits demanding damages for the compromise of their security
and their user security. Mr. ShaSha Stark did everything in his power to retain a few clients.
Ultimately, he could only manage to retain around 25 contracts out of around 260. Mr.
ShaSha Stark managed to secure these clients by selling his assets and investing in the
company infrastructure. After the change in Infrastructure, he called his company Stark
Enterprise 2.0. This damage control exercise was lauded by the public and community at
large. People were even sure that if Mr. ShaSha stark could put in steps to improvise his
technology and focus on creating a robust infrastructure that can handle itself better against
such attacks of higher intensity, confidence of the public and major clients can be secured,
and it would not be too long before he positions himself again as a member of the big
leagues. There were even blogs describing how, if Mr. ShaSha stark manages to do this, his
story would be taught in business schools as an inspiration.
The Iron Bank of Bravos, one of the leading creditors of Stark Enterprises evaluated the
solvency of Stark Enterprises when it experienced the cyber-attack and was convinced that
there were no adequate cash flows to keep the company going for long. As it predicted, Stark
Enterprises defaulted on its payments and insolvency looked imminent.
On 1st January 2020, an application was made before the National Company Law Tribunal at
Titan, Titan Bench (‘NCLT’), by The Iron Bank of Bravos (‘Financial Creditor’) under
section 7 of the Insolvency and Bankruptcy Code, 2016 (‘I&B Code, 2016’).
The Hon’ble NCLT noted that there was a debt, of which there was a default and that, all
requirements under section 7 of the I&B Code, 2016 have been satisfied. With this, the
Hon’ble NCLT admitted the application filed by the Financial Creditor. The Financial
Creditor had suggested that Mr. Conan Subramanian (bearing IP Registration of
IPA/007/9211) to act as the Interim Resolution Professional and he was accepted. The final
order containing the admission details and the authorisation of Mr. Conan Subramanian
(‘Interim Resolution Professional / IRP’) as the IRP was made on 8.01.2020.
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Moot Proposition – 6th Zenith Internal Moot Court Competition, 2021
Due to reasons best known to Mr. Conan Subramanian, he took charge as the IRP of Stark
Enterprises after 14 days of the order being communicated to him. This caused a lot of
concern to the creditors. A lot of functions which were to be discharged by him, naturally
stood delayed while the period of 180 days under the I&B Code, 2016 was ticking.
Finally, on 22nd January 2020, the IRP appears at Stark Enterprises headquarters and informs
all the staff and management personnel, including Mr. ShaSha Stark, that he has been
appointed by the NCLT as the IRP of Stark Enterprises vide order dated 08.01.2020 and that
all personnel and management are to extend full co-operation with him. He also informed that
an IRP is an officer of court and any obstruction to his work will be punishable by the
Tribunal.
Having said that, the IRP took control of the assets of Stark Enterprises (Also referred to as
Stark Enterprises 2.0.) (‘Corporate Debtor’), and appointed security personnel who answer
to him at all locations of the Corporate Debtor. Thereafter, he had discharged the following
duties as per the following timelines:
DATE DUTY DISCHARGED
25.01.2020 Public announcement was given in 2 newspapers in English
language inviting claims that are outstanding to various creditors.
05.02.2020 According to the relevant provisions of the I&B Code, 2016, it
was decided that 05.02.2020 was the last date on which the IRP
would be accepting claims.
In response to the call for invitation of claims, 8 financial creditors and 6 operational
creditors have filed their claims before 05.02.2020.
12.02.2020 The IRP finishes collating and verifying all the claims.
14.02.2020 The IRP constituted the first Committee of Creditors (‘CoC’)
meeting.
22.02.2020 The IRP calls for the 1st meeting of the CoC. In the first meeting
of the CoC, the matter of choosing whether to appoint the existing
IRP as a Resolution Professional (‘RP’) or not was taken up for
consideration and it was unanimously agreed that the RP was to
be a different person because of the delay caused to the Corporate
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Moot Proposition – 6th Zenith Internal Moot Court Competition, 2021
Insolvency Resolution Process (‘CIRP’) by the IRP.
The same was put before the NCLT and the NCLT was pleased to pass an order appointing
Mr. Yagami Yashwanth as the Resolution Professional.
27.02.2020 Mr. Yagami Yashwanth takes charge as the RP
05.03.2020 The RP undertook the task of appointing valuers.
12.03.2020 The Information Memorandum (‘IM’) was shared by the RP with
the members of the CoC.
06.04.2020 Form G was subsequently published by the RP
06.04.2020 An invitation for Expression of Interest (‘EoI’) was made by the
RP.
21.04.2020 The last date for submission of EoI was
01.05.2020 The RP had created a Provisional List of Prospective Resolution
Applicants (‘PRA’).
06.05.2020 The RP had called for submission of any objections to the PRA
list. Seeing none, the RP proceeded with the CIRP.
06.05.2020 The RP had issued a Request for Resolution Plan (‘RFRP’) and
had also issued the Evaluation Matrix (‘EM’) and IM.
16.05.2020 The Final list of PRAs was released by the RP.
05.06.2020 All the Resolution Plans were received
06.07.2020 Last date for completion of CIRP.
When the Form-G was published, the RP had received 3 EoIs. The 3 EoIs were issued by:
a. Wayne Tech Enterprises Private Limited (‘PRA 1’),
b. Accutech Enterprises Private Limited (‘PRA 2’), and
c. Braintronics Private Limited (‘PRA 3’).
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Moot Proposition – 6th Zenith Internal Moot Court Competition, 2021
After that, PRA 3 was rejected at the time of vetting of Resolution Plans because PRA 3 was
ineligible under section 29A of the I&B Code, 2016.
When PRA 1 and PRA 2 submitted their resolution plans (Hereinafter PRA 1 and PRA 2 will
be referred to as ‘RA 1’ (Wayne Tech Enterprises Private Limited) and ‘RA 2’ (Accutech
Enterprises Private Limited) respectively) and their plans were put before the members of the
CoC, there were extensive deliberations. After that, the CoC was of the opinion that RA 1
provided for a better plan and that their plan offered better pay-out with lesser haircut and a
better management structure and future to the Corporate Debtor. RA 2 was not willing for
negotiations, so it was rejected. However, there were a couple of issues that arose.
The RA 1 had provided that out of the admitted sum of Rs. 1480,00,00,000/- (Rupees One
Thousand Four Hundred and Eighty Crores Only), Rs. 754,00,00,000/- (Rupees Seven
Hundred and Fifty-Four Crores Only) was time-barred according to the information obtained
by it from the RP. The RA 1 had made it clear that it would not pay any amount of the
754,00,00,000/- (Rupees Seven Hundred and Fifty-Four Crores Only) which was time barred.
Out of the remaining Rs. 726,00,00,000/- (Rupees Seven Hundred and Twenty-Six Crores
Only), the RA 1 proposed to pay Rs. 290,40,00,000/- (Rupees Two Hundred and Ninety
Crores Forty Lakh only) and the remaining was a haircut for the Creditors. To this, the CoC
said that they would be inclined to reject the Resolution Plan submitted by the RA 1 if the
offer was not increased and if the Rs. 754,00,00,000/- (Rupees Seven Hundred and Fifty-Four
Crores Only) was also not considered.
The RA 1 contended that time-barred claims were to be rejected by the RP in the first place
and should not have been allowed to form a part of the total claim amount. The RA 1 blamed
the RP for cause of delay in the CIRP. To this, the RP calmly explained that various
judgments of various Tribunals have made it clear that the RP does not have the power to
adjudicate on claims since he/she is merely an administrative authority, playing his/her role in
CIRP.
In the meantime, the operational creditors came to know that no amount was being provided
to them in proposed resolution plan by the RA 1. They, through Palmer Technologies Private
Limited, had expressed their concerns to the RP and were of the opinion that, since no
amount was being set aside for the operational creditors, the proposed resolution plan was not
in compliance with the provisions of section 30 of I&B Code, 2016 and the RP ought not to
have put the plan before the members of the CoC. The RP, in response had clarified that the
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Moot Proposition – 6th Zenith Internal Moot Court Competition, 2021
plan followed the provisions of Section 30 of the I&B Code, 2016 and that the plan was put
forward before the CoC because, according to section 30 of the I&B Code, 2016, the
resolution plan that was submitted needed to provide payment of some amount to the
operational creditors in priority. The manner of payment of this “amount” was to be specified
by the Insolvency and Bankruptcy Board of India (‘IBBI’) and should not be less than:
a. The amount to be paid to such creditors in the event of liquidation of the Corporate
Debtor under section 53 of the I&B Code, 2016; or
b. The amount that would have been paid to such creditors, if the amount to be
distributed under the resolution plan had been distributed in accordance with the order
of priority in sub-section (1) of section 53 of the I&B Code, 2016 –
Whichever is higher.
In the present case, the RP had clarified that in both of the above instances, the amount that
the Operational Creditors (‘OC’) were eligible for was zero rupees and therefore, the plan not
providing for any amount to the OCs was justified.
Aggrieved by the inaction of the RP in protecting the interests of the stakeholders under the
I&B Code, 2016, the OCs have collectively approached the NCLT seeking relief. On the
other hand, the RA 1 also moved the Hon’ble NCLT against the inaction of the RP in
rejecting claims time barred claims and the CoC’s demands to include time-barred claims as a
part of the resolution plan amount.
There will be no other resolution plan if the current one submitted by RA 1 is not admitted
and that would lead to the liquidation of the Corporate Debtor leading to loss of jobs of
hundreds of employees. Moreover, the RA 1 is sure that, after reports from its own valuers,
the plan amount is adequate and fair and that, it is better than the liquidation value.
The OCs’ application was filed before the NCLT and was given the I.A. no. of 775/2020 in
C.P. (IB). 125/7/Titan/2020 and notice was issued to the RP and the RA 1 in this matter.
The application filed by the RA 1 was given the I.A. no. 776/2020 in C.P. (IB).
125/7/Titan/2020 and notice was issued to the RP and members of the CoC.
Finally, on 25.06.2020, the matters were clubbed and listed for preliminary hearing and the
issues were framed as follows:
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Moot Proposition – 6th Zenith Internal Moot Court Competition, 2021
(1) Whether the Resolution Professional is empowered to adjudicate on claims and reject
time-barred claims or not?
(2) Whether the RA 1 can decide not to provide for time barred claims in its resolution
plan or not and Whether the Resolution Applicant can move the NCLT to question the
commercial wisdom of the CoC or not?
(3) Whether the RA 1 erred in not providing for any amount to the Operational Creditors
or not and whether the Resolution Professional ought not to have presented the plan
submitted by the RA 1 to the CoC or not?
The matter is now listed for final hearing before the NCLT on 03.07.2020. The laws of
Paradisia are pari-materia to the laws of the Republic of India.
Disclaimer: All Characters, events, names and illustrations in this problem are entirely
fictional. Any similarity to any person – living or dead, is purely coincidental. No copyright
breach is intended through this moot problem. This problem is solely designed for a mock
legal exercise for law students to make learning fun and interesting and is not intended to
draw any reference to any entity or person – living or dead.
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Moot Proposition – 6th Zenith Internal Moot Court Competition, 2021
Annexure - 1
A. List of Creditors
Name of Creditor Nature of Creditor Claim Amount (In
crores)
Iron Bank of Bravos Secured Financial 239
Creditor
Agnate Bank Secured Financial 219
Creditor
Fountain Banks Financial Creditor 185
Sunray Financial Financial Creditor 159
Big Heart Bank Financial Creditor 188
First Guarantee Banc Financial Creditor 215
Banque Rempart Financial Creditor 200
Banque Diligence Financial Creditor 75
Total Financial Claims (A) 1480
Palmer Technologies Operational Creditors 25
Private Limited
Ace Chemicals Technology Operational Creditors 19
Private Limited
Janus Tech Private Limited Operational Creditors 13
Iceburg tech solutions Operational Creditors 3
private limited
Total Operational Claims (B) 60
Total Claim Amount (A+B) 1540
B. Voting Share of Creditors
Name of Creditor Voting Share
Iron Bank of Bravos 16.14%
Agnate Bank 14.79%
Fountain Banks 12.5%
Sunray Financial 10.74%
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Moot Proposition – 6th Zenith Internal Moot Court Competition, 2021
Big Heart Bank 12.70
First Guarantee Banc 14.52%
Banque Rampart 13.51%
Banque Diligence 5.06%
Total 100%
C. Time-barred claims
Name of the Total claim Time barred Unbarred claim
Bank amount (In claim (In (In Crores)
Crores) Crores)
Iron Bank of 239 198 41
Bravos
Agnate Bank 219 171 48
Fountain Banks 185 40 145
Sunray Financial 159 22 137
Big Heart Bank 188 8 180
First Guarantee 215 138 77
Banc
Banque Rampart 200 163 37
Banque Diligence 75 14 61
Total 1480 754 726
D. Abbreviations
Abbreviation Meaning
CD Corporate Debtor
CIRP Corporate Insolvency Resolution Process
CoC Committee of Creditors
EM Evaluation Matrix
EoI Expression of Interest
I&B Code, 2016 Insolvency and Bankruptcy Code, 2016
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Moot Proposition – 6th Zenith Internal Moot Court Competition, 2021
IBBI Insolvency and Bankruptcy Board of India
IM Information Memorandum
IRP Interim Resolution Professional
NCLT National Company Law Tribunal
OC Operational Creditor
PRA Prospective Resolution Applicant
RA Resolution Applicant
RFRP Request for Resolution Plan
RP Resolution Professional
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