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2018 (8) TMI 1840 - Tri - Insolvency and Bankruptcy


Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Allegations of suppression of facts and misrepresentation by the Petitioner.
3. Authority of Mr. Varun Agarwal to file the petition.
4. Applicability of the doctrine of Res Judicata.
5. Applicability of the Insolvency and Bankruptcy Code to banks and financial institutions.
6. Maintenance of loan accounts and alleged discrepancies.
7. Possession and validity of mortgage documents.

Issue-Wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Petitioner, JM Financial Asset Reconstruction Co. Ltd., sought to initiate CIRP against the Corporate Debtor, Veer Gurjar Aluminium Industries Pvt. Ltd., under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Corporate Debtor had defaulted in repaying various facilities granted by Corporation Bank, which were later assigned to the Petitioner. The Tribunal noted that the Petitioner, being a financial creditor, is entitled to initiate CIRP when there is debt and default. The Tribunal found sufficient evidence of debt and default, thereby admitting the petition.

2. Allegations of suppression of facts and misrepresentation by the Petitioner:
The Corporate Debtor contended that the Petitioner suppressed vital facts and presented distorted information. However, the Tribunal found that all important and vital facts required for just adjudication were pleaded in the petition. The Tribunal dismissed the allegations of suppression and misrepresentation, stating that the Petitioner had provided all necessary details.

3. Authority of Mr. Varun Agarwal to file the petition:
The Corporate Debtor challenged the authority of Mr. Varun Agarwal to file the petition, claiming that the resolution passed by the Board of Directors did not comply with the Companies Act and Secretarial Standards. The Tribunal found that the Board of Directors had authorized Mr. Varun Agarwal to initiate legal proceedings on behalf of the Petitioner through a resolution passed on 13.10.2017. The Tribunal considered the objection highly technical and not significant in the context of the Insolvency and Bankruptcy Code.

4. Applicability of the doctrine of Res Judicata:
The Corporate Debtor argued that the doctrine of Res Judicata applied because proceedings were already pending before the DRT and under the SARFAESI Act. The Tribunal clarified that proceedings before the DRT and under the SARFAESI Act are for the recovery of money, whereas the current proceedings under the Insolvency and Bankruptcy Code are for initiating CIRP. Consequently, the doctrine of Res Judicata was deemed inapplicable.

5. Applicability of the Insolvency and Bankruptcy Code to banks and financial institutions:
The Corporate Debtor contended that the Insolvency and Bankruptcy Code does not apply to banks and financial institutions. The Tribunal dismissed this argument, noting that various NCLT Benches in India have been passing orders on petitions filed under Section 7 of the Code by banks and financial institutions. The Tribunal also referenced the constitutional validity of relevant sections of the Code upheld by the Calcutta High Court.

6. Maintenance of loan accounts and alleged discrepancies:
The Corporate Debtor raised issues regarding unauthorized debits, interest charged on those debits, and discrepancies in the loan account statements. The Tribunal acknowledged these concerns but stated that the Corporate Debtor could point out such issues to the Interim Resolution Professional at the time of claim admission, who would address them in accordance with the law.

7. Possession and validity of mortgage documents:
The Corporate Debtor argued that the Petitioner was not in possession of the original Memorandum of Equitable Mortgage and that the mortgage documents were flawed. The Tribunal found that the mortgage was created in favor of Corporation Bank in 2008 and 2009, and the charge was registered with the ROC. The Tribunal dismissed the contention that the petition lacked merit due to the absence of original documents.

Conclusion:
The Tribunal concluded that the Corporate Debtor defaulted in repaying the loan and that the Petitioner was entitled to initiate CIRP under Section 7 of the Insolvency and Bankruptcy Code. The petition was admitted, and an Interim Resolution Professional was appointed to carry out the functions as mentioned under the Code. The Tribunal also ordered a moratorium on suits, asset transfers, and recovery actions against the Corporate Debtor, effective from 09.08.2018 until the completion of the CIRP or further orders.

 

 

 

 

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