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2022 (5) TMI 552 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - It is no longer res Integra that proceedings under Section 7 of IBC, 2016 is filed for Insolvency Resolution of the Corporate Debtor and not for recovery of money from the Corporate Debtor. In so far as Application under Section 7 of IBC, 2016 is concerned, the Adjudicating Authority is required to satisfy that there is a debt and default on the part of the Corporate Debtor. Once the same is adjudicated, then the Adjudicating Authority is required to initiate Corporate Insolvency Resolution Process as against the Corporate Debtor in terms of Section 7(5) of IBC, 2016. In view of the same, application filed by the Respondent is devoid of merits and accordingly stand dismissed. The financial debt is proved by the Financial Creditor and the default is being committed on the part of the Corporate Debtor, this Tribunal is left with no other option than to proceed with the present case and initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor. The Application stands admitted in terms of Section 7(5) of IBC, 2016 and the moratorium shall come in to effect as of this date.
Issues Involved:
1. Admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Existence of debt and default by the Corporate Debtor. 3. Allegation of the application being barred by limitation. 4. Allegation of forum shopping due to parallel proceedings before DRT. 5. Interlocutory applications for impleading a necessary party and keeping the main application in abeyance. Issue-wise Detailed Analysis: 1. Admission of the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016: The application was filed by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Financial Creditor claimed a sum of Rs. 8,04,86,434/- as due and payable by the Corporate Debtor. The application included all necessary details as per the prescribed form and rules, including the particulars of the debt, default, and the proposed Interim Resolution Professional (IRP). 2. Existence of Debt and Default by the Corporate Debtor: The Tribunal observed that the Corporate Debtor had borrowed a total sum of Rs. 5,20,00,000/- under various loan accounts and had executed promissory notes and other loan documents. The Corporate Debtor admitted the outstanding liability of Rs. 5,20,00,000/- in its counter affidavit. The Financial Creditor classified the loan accounts as Non-Performing Assets (NPA) on 30.06.2018, 31.05.2018, and 26.07.2018. The Tribunal found that the existence of debt and default had been proven beyond reasonable doubt. 3. Allegation of the Application Being Barred by Limitation: The Corporate Debtor contended that the application was filed beyond the limitation period. However, the Tribunal noted that the application was filed on 18.03.2021, based on loan accounts that became NPA on 31.05.2018. Thus, the application was filed within the limitation period and was not barred by limitation. 4. Allegation of Forum Shopping Due to Parallel Proceedings Before DRT: The Corporate Debtor argued that the application amounted to forum shopping since there were parallel proceedings before the Debt Recovery Tribunal (DRT). The Financial Creditor countered that proceedings under Section 7 of the IBC are for insolvency resolution and not for recovery of money. The Tribunal cited precedents confirming that pending DRT proceedings do not preclude the initiation of CIRP under the IBC. Therefore, the allegation of forum shopping was dismissed. 5. Interlocutory Applications for Impleading a Necessary Party and Keeping the Main Application in Abeyance: The Respondents filed IA/839/2021 to implead the Deputy Commissioner of Income Tax (Benami Prohibition) and IA/844/2021 to keep the main application in abeyance. The Tribunal dismissed both interlocutory applications, stating that the proceedings under Section 7 of the IBC are for insolvency resolution and not for recovery of money. The Tribunal is required to ascertain the existence of debt and default, and once established, initiate the CIRP. Conclusion: The Tribunal admitted the application under Section 7 of the IBC, 2016, and initiated the Corporate Insolvency Resolution Process against the Corporate Debtor. A moratorium was declared as per Section 14 of the IBC, and Mr. Gopalsamy Ganesh Babu was appointed as the Interim Resolution Professional (IRP). The Tribunal directed the IRP to take charge of the Corporate Debtor's management and comply with the provisions of the IBC. The application was admitted, and the moratorium came into effect immediately.
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