2020 (10) TMI 321 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - The total amount of outstanding debt owed to the two Petitioners was ₹ 38,47,000 in respect of Petitioner No. 1, and ₹ 38,47,000 and ₹ 38,59,882 respectively to Petitioner No. 2 in respect of his two investments. The total debt works out to ₹ 1,15,53,882/-. The same has not been opposed before us and clearly amounts to a debt u/s 5(8)(c) of the Code. The Hon'ble Supreme Court in the case of Innoventive Industries Ltd. Vs. ICICI Bank Ltd., 2017 (9) TMI 58 - SUPREME COURT held that the scope of enquiry of an Adjudicating Authority in an Application made under Section 7 is very limited. The moment the Adjudicating Authority is satisfied that a Default has occurred, the Application must be admitted. The Adjudicating Authority has to merely satisfy itself that a default has occurred, even if the default is disputed so long as it is due, unless interdicted by some law. Although Section 7(5) of the Code says that the Adjudicating Authority may admit or may dismiss a petition, looking at the facts of the case we are of the view that the petition needs to be admitted. A perusal of the Financial Statements of the Corporate Debtor for the FYs 2015-16, 2016-17 and 2017-18 gives the following picture i) Its Liabilities increased from ₹ 55,55,96,184 as on 31.03.2016 to ₹ 62,79,11.936 as on 31.03.2017. ii) It earned a meagre profit of ₹ 1,25,983 as on 31.03.2017 and a loss of ₹ 15,87,734 as on 31.03.2016, from its operations; iii) Its cash flow statement showed a decrease in cash/cash equivalent of ₹ 2,59,11,523 as on 31.03.2017 over the preceding FY; iv) Its interest liability on Debentures alone as on 31.03.2017 was ₹ 2,19,18,544; v) As on 31.03.2018 (as per the information available on the MCA website) it had a negative Net Worth of 2,99,55,490; and total debts of ₹ 63,34,80,737 including the debt on account of NCDs. It is clear therefore, that the financial status of the Corporate Debtor is not healthy and indicates that it is not in a position to repay its debts. Apparently for this reason it has not come forward to oppose the Petition. This is a fit case for initiation of CIRP in respect of the Corporate Debtor M/s. Greens Farm Tech Private Limited. - Application admitted - moratorium declared.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Default in payment by Corporate Debtor
3. Admission of the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016
4. Appointment of Interim Resolution Professional (IRP)
5. Declaration of Moratorium

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petition was filed by the Petitioners/Financial Creditors under Section 7 of the IBC, 2016, read with Rule 4 of the I&B (Application to Adjudicating Authority) Rules 2016, seeking to initiate CIRP against the Corporate Debtor, M/s. Greens Farm Tech Private Limited. The grounds for the petition were the default in payment of a total outstanding amount of ?1,15,53,882, which includes both the principal amount and interest.

2. Default in Payment by Corporate Debtor:
The Corporate Debtor issued Non-Convertible Debentures (NCDs) in June 2014 to fund the acquisition and development of coffee estates and residential plots. The Petitioners invested in these NCDs, with Petitioner No.1 investing ?25,19,658 on 19.06.2015, and Petitioner No.2 investing ?25,73,849 on 18.06.2015 and ?26,04,212 on 16.07.2015. The NCDs were to mature in June and July 2019, with interest payable at 20.5% per annum on a quarterly basis. However, the Corporate Debtor defaulted on interest payments post-December 2016 and requested extensions for repayment, which were not honored.

3. Admission of the Petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016:
The Tribunal noted the undisputed facts that the Petitioners had invested in the NCDs and the Corporate Debtor had defaulted on payments. The Corporate Debtor's financial statements indicated its inability to repay its debts, with liabilities increasing and a negative net worth. The Tribunal referred to the Supreme Court judgment in Innoventive Industries Ltd. Vs. ICICI Bank Ltd., which mandates the admission of the petition if a default has occurred. Consequently, the Tribunal admitted the petition, finding it a fit case for initiating CIRP.

4. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Jugraj Singh Bedi as the IRP, as suggested by the Petitioners. His written consent and eligibility were confirmed, with no disciplinary proceedings pending against him. The IRP was directed to conduct the CIRP in accordance with the IBC, 2016, and the Rules framed by the Insolvency and Bankruptcy Board of India (IBBI).

5. Declaration of Moratorium:
The Tribunal declared a moratorium, prohibiting:
- The institution or continuation of suits or proceedings against the Corporate Debtor.
- Transferring, encumbering, or disposing of any assets of the Corporate Debtor.
- Actions to foreclose, recover, or enforce any security interest.
- Recovery of any property by an owner or lessor.
- Termination or suspension of the supply of essential goods or services to the Corporate Debtor.
The moratorium would be effective from the date of the order until the completion of the CIRP.

Conclusion:
The Tribunal admitted the petition for initiating CIRP against M/s. Greens Farm Tech Private Limited, appointed Mr. Jugraj Singh Bedi as the IRP, and declared a moratorium to facilitate the CIRP. The IRP was directed to file progress reports and complete the CIRP within the stipulated time. The case was posted for the IRP's report on 20th March 2020.