2018 (7) TMI 1897 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process in respect of respondent company M/S Radius Infratel Private Limited referred to as the corporate debtor - Section 7 of the Insolvency and Bankruptcy Code 2016 - Held that - Under Section 7 of the Code when there has been occurrence of existence of default which is much more than rupees 1 lakh as provided under Section 4 of the Code the application is clearly maintainable and deserves to be admitted. It is also well settled that pendency of DRT proceedings or proceedings under SARFAESI Act 2002 cannot create any bar on initiation of Corporate Insolvency Resolution Process under the Code - The Code requires the adjudicating authority to only ascertain and record satisfaction in a summary adjudication as to the occurrence of default before admitting the application. In the case in hand the respondent company has committed default in repayment of the outstanding amount. Moreover the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been a default in payment of the financial debt - As a sequel to the above discussion and in terms of Section 7 (5) (a) of the Code the present application is admitted - Moratorium in terms of Section 14 of the Code also declared.

Summary

Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Territorial jurisdiction of the Tribunal.
3. Authorization of the applicant’s representative.
4. Appointment of Interim Resolution Professional (IRP).
5. Details of financial facilities and defaults.
6. Objections raised by the respondent regarding the claimed amount and interest rates.
7. Declaration of the account as Non-Performing Asset (NPA).
8. Pendency of other legal proceedings.
9. Satisfaction of conditions under Section 7(5)(a) of the Code.
10. Moratorium under Section 14 of the Code.

Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Union Bank of India, as the financial creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to trigger the Corporate Insolvency Resolution Process (CIRP) against M/S Radius Infratel Private Limited, the corporate debtor.

2. Territorial jurisdiction of the Tribunal:
The respondent company, having its registered office in New Delhi, falls under the territorial jurisdiction of the National Company Law Tribunal (NCLT), Principal Bench, New Delhi, as per Section 60(1) of the Code.

3. Authorization of the applicant’s representative:
Mr. Pawan Kumar Guar, Assistant General Manager of the applicant bank, was authorized through a Power of Attorney dated 19.06.2002 to file the application on behalf of the bank. The Tribunal recognized this authorization as valid for initiating the CIRP.

4. Appointment of Interim Resolution Professional (IRP):
The applicant proposed Shri Arvind Garg as the IRP, who satisfied the requirements of Section 7(3)(b) of the Code, with no disciplinary proceedings pending against him. His appointment was accepted by the Tribunal.

5. Details of financial facilities and defaults:
The applicant provided detailed information about the financial facilities sanctioned, amounts disbursed, and the defaults committed by the respondent. The total amount of default as on 31.12.2017 was substantial, with various documents supporting the debt, including demand promissory notes, loan agreements, and balance confirmation letters.

6. Objections raised by the respondent regarding the claimed amount and interest rates:
The respondent objected to discrepancies in the claimed amounts and excessive interest rates. The Tribunal noted that the variance in the claimed amount was due to the accumulation of unpaid interest over time. The interest rates were in accordance with the loan agreements, which allowed for adjustments based on the bank's policies and RBI directives. The respondent's acknowledgment of the debt through balance confirmation letters and a compromise offer of ?52.60 crores further validated the applicant's claims.

7. Declaration of the account as Non-Performing Asset (NPA):
The account was declared NPA on 31.12.2015 following RBI guidelines. Despite payments made by the respondent, the defaults persisted, leading to the classification of the account as NPA. The Tribunal found sufficient evidence of the default through certified bank statements and other documents.

8. Pendency of other legal proceedings:
The Tribunal clarified that the pendency of proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and the SARFAESI Act, 2002, does not bar the initiation of CIRP under the Code.

9. Satisfaction of conditions under Section 7(5)(a) of the Code:
The Tribunal confirmed that the conditions under Section 7(5)(a) were met: the default had occurred, the application was complete, and no disciplinary proceedings were pending against the proposed IRP. The Tribunal was satisfied with the applicant's entitlement to claim the outstanding debt and the occurrence of default.

10. Moratorium under Section 14 of the Code:
Upon admitting the application, the Tribunal declared a moratorium as per Section 14, prohibiting suits, asset transfers, foreclosure actions, and recovery of property by owners or lessors. The moratorium does not apply to transactions notified by the Central Government or the supply of essential goods or services.

Conclusion:
The application was admitted, and Shri Arvind Garg was appointed as the IRP. The Tribunal directed public announcement of the CIRP and declared a moratorium. The IRP was instructed to perform duties as per the Code, with the corporate debtor's personnel required to cooperate fully.

Order:
The Tribunal ordered the communication of the judgment to all relevant parties within seven days.