2017 (7) TMI 1242 - Tri - Insolvency and Bankruptcy

Corporate insolvency resolution process - default in payment of payment of debt - Held that - The information utility has not yet been constituted and the respondent-corporate debtor is found to have committed the default, for which, there was basically no contest, as already discussed. The plea of the petitioner that the total amount of default inclusive of interest should be considered as ₹ 24,87,370/- cannot be accepted in these proceedings because the calculation has to be made in the summary proceedings, not on the basis of the interest compounded @ 18% monthly in case of default. As per the terms of the agreement, the interest was to commence in case, the amount is not repaid on or before 31.03.2016. This was not a business transaction, but a case of simple loan. So, the interest can be calculated for the purpose of preparing the resolution plan at simple rate of 12% per annum on the defaulted amount on the basis of the terms of the loan agreement dated 03.03.2015. If the petitioner intends to claim the interest at the higher rate or compounded interest, he may have the remedy for such a relief before the Civil Court. In view of the above, the default having occurred and the application filed by the Financial Creditor in Form No. 1 prescribed under the rules being complete in all respects, the petition deserves to be admitted.

Summary

Issues:
1. Initiation of corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Default in repayment of loan amount by the respondent-Corporate Debtor.
3. Validity of documents presented by the petitioner.
4. Compliance with procedural requirements for initiating insolvency proceedings.
5. Admission of the petition and imposition of moratorium.

Analysis:
1. The petition filed by the Financial Creditor sought to initiate the corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016. The petitioner alleged that the respondent-Corporate Debtor had borrowed a specific amount and failed to repay it within the agreed timeline, leading to the default. The application was filed in accordance with the prescribed rules, and the jurisdiction of the Tribunal was established.

2. The petitioner provided evidence of the loan agreement, disbursement of funds, and subsequent default by the respondent-Corporate Debtor. Despite the respondent's admission of the outstanding amount in a communication, no objections were raised against the petition. The Tribunal noted the default and the absence of any response from the respondent, indicating a lack of dispute regarding the default.

3. The validity of the documents presented by the petitioner, including the loan agreement, promissory note, letters, power of attorney, and board resolution, was crucial for establishing the claim and initiating insolvency proceedings. The Tribunal scrutinized these documents to ensure compliance with legal requirements and procedural formalities.

4. Procedural compliance was a key aspect of the case, with the Tribunal identifying and addressing defects in the initial filing. The petitioner rectified these defects within the specified timeline, providing the necessary resolutions, letters, and ledger accounts to support the claim of default and the initiation of insolvency proceedings.

5. After thorough examination and consideration of the facts presented, including the default, admission by the respondent, and compliance with procedural requirements, the Tribunal admitted the petition. A moratorium was imposed to protect the interests of the parties involved, prohibiting certain actions against the Corporate Debtor and ensuring the continuity of essential supplies during the resolution process. The Tribunal scheduled further proceedings for the appointment of an Interim Resolution Professional.

This comprehensive analysis reflects the Tribunal's detailed review of the issues raised, the evidence provided, and the legal requirements for initiating and progressing through the corporate insolvency resolution process as per the provisions of the Insolvency and Bankruptcy Code, 2016.