2020 (2) TMI 1588 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Legality of deed of assignment of debt - time limitation - HELD THAT - It is not in dispute that the original creditor of the Corporate Debtor i.e. The South Indian Bank Limited granted and disbursed loan amount of ₹ 25 Crore in favour of the Corporate Debtor. It is also not in dispute that the Corporate Debtor did not clear the outstanding debt and thereby committed default in paying the financial debt. Hence, on the basis of above admitted facts, the Corporate Debtor has to be admitted in CIRP. However, the Corporate Debtor took defence that debt has been illegally assigned in favour of the Financial Creditor. The Hon'ble NCLAT in case of Lalan Kumar Singh, Executive Director shareholder of GPI Textile Ltd. Vs. Phoenix ARC Pvt. Ltd. Anr. 2018 (12) TMI 1648 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL clearly held on similar set of facts that, In present case we find that the appellant has sought declaration that the assignment made by HSBC to 'Phoenix' as illegal, which can be raised only in a civil suit. The appellant is trying to convert the proceedings under the 'I B Code' as civil proceedings akin to a trial which is not the legislative intent. The pronouncement explains in clear terms the law set out under Section 7 of I B Code. This Authority has only to see whether the financial debt more than ₹ 1 Lakh is due and payable by the Corporate Debtor to the Financial Creditor and the Corporate Debtor committed default in paying the debt. So also, the proceeding is filed within period of limitation. Both facts are proved from the evidence on record. The application is filed within period of limitation. Application admitted - moratorium declared.

Summary

Issues:
- Application under Section 7 of Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process (CIRP) due to default in payment of financial debt.
- Validity of the deed of assignment and its impact on the application.
- Admissibility of the Corporate Debtor in CIRP despite the defense raised.
- Appointment of Interim Resolution Professional (IRP) and initiation of CIRP process.

Analysis:
1. The Financial Creditor filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor for defaulting on a financial debt of Rupees 43,01,53,989. The debt was originally granted by The South Indian Bank Limited and later assigned to the Financial Creditor.

2. The Corporate Debtor raised a defense challenging the validity of the deed of assignment dated 17.03.2017, arguing that it was not properly stamped and lacked consideration. However, the Tribunal cited legal precedents to establish that such defenses are not permissible under the Insolvency and Bankruptcy Code, emphasizing that the key consideration is whether the debt is due and payable.

3. The Tribunal referenced the Supreme Court ruling in the case of Innoventive Industries Limited Vs. ICICI Bank and the NCLAT judgment in a similar case to support its decision. It clarified that the Tribunal's role is to verify the existence of a financial debt exceeding Rupees 1 Lakh and the default in payment by the Corporate Debtor, both of which were established in this case.

4. The Tribunal admitted the Corporate Debtor in CIRP, declared a moratorium, and appointed an Interim Resolution Professional (IRP) for the process. The orders included the initiation of the resolution process, public announcements, and the necessary steps to be taken during the moratorium period, as per the provisions of the Insolvency and Bankruptcy Code.

5. The Tribunal also directed the Financial Creditor to pay the IRP an advance fee, outlined the duties of the Resolution Professional, and instructed the Registry to communicate the order to all relevant parties. The matter was listed for a progress report, emphasizing the time-bound nature of the Corporate Insolvency Resolution Process.