2019 (10) TMI 108 - Tri - Insolvency and Bankruptcy

Maintainability of application - Initiation of CIRP - Corporate Debtor - failure in repayment of outstanding amount - Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT - It is found that the amount of loan advanced to the corporate debtor company falls within the category of financial debts. Further the corporate debtor has committed default, which meets the requirement of Section 3(1) and (12) of the Code to initiate the CIRP in respect of the Corporate Debtor company. As the default of debts is established for a sum of ₹ 8,00,000/- simple interest @ 9% per annum (as on 01.04.2018), the petition is found complete in terms of the provisions of the I B Code. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Default and debt acknowledgment by the Corporate Debtor
3. Appointment of Interim Resolution Professional (IRP)
4. Enforcement of Moratorium under Section 14 of the Insolvency and Bankruptcy Code (I&B Code)

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The application was filed by a financial creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, to initiate the CIRP against the corporate debtor. The financial creditor had advanced an unsecured financial loan of ?8 lakhs to the corporate debtor, which was not repaid as per the agreed terms.

2. Default and Debt Acknowledgment by the Corporate Debtor:
The financial creditor provided evidence of the loan agreement dated 01.09.2017 and a promissory note, confirming the loan and its terms. Despite the demand notice issued on 03.01.2018 and a reminder on 08.02.2018, the corporate debtor failed to repay the loan. The corporate debtor acknowledged the debt and expressed no objection to the initiation of CIRP, citing business losses and adverse market conditions as reasons for non-payment.

3. Appointment of Interim Resolution Professional (IRP):
The financial creditor proposed Mr. Kashyap Shah as the Interim Resolution Professional (IRP), who provided written consent and declared no pending disciplinary proceedings against him. The tribunal found the application complete and in conformity with the prescribed procedure under the I&B Code, thus admitting the petition and appointing Mr. Kashyap Shah as the IRP.

4. Enforcement of Moratorium under Section 14 of the Insolvency and Bankruptcy Code (I&B Code):
Upon admission of the application, the tribunal ordered a moratorium effective from 12.07.2019, prohibiting:
- Institution or continuation of suits or proceedings against the corporate debtor.
- Transfer, encumbrance, or disposal of the corporate debtor’s assets.
- Actions to foreclose or enforce any security interest.
- Recovery of property occupied by the corporate debtor.

The tribunal directed the IRP to make a public announcement of the CIRP and perform duties as specified under Sections 17, 18, 20, and 21 of the I&B Code. All personnel associated with the corporate debtor were mandated to assist the IRP as per Section 19 of the Code. The IRP was tasked with protecting and preserving the value of the corporate debtor's property and managing its operations as a going concern.

Conclusion:
The tribunal admitted the application for initiating CIRP against the corporate debtor, appointed an IRP, and enforced a moratorium to facilitate the resolution process. The corporate debtor's acknowledgment of debt and inability to repay due to business losses were significant factors in the tribunal's decision.