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2018 (7) TMI 1983 - Tri - Insolvency and BankruptcyInitiation of the corporate insolvency resolution process (CIRP) - territorial jurisdiction of this Bench of the Tribunal - Section 7 (5) (a) of the Insolvency and Bankruptcy Code - whether the petitioner is a financial creditor of the respondent? HELD THAT - There is no condition stipulated in section 5 of SARFAESI Act 2002 that an asset reconstruction company has to acquire only NPAs of banks or financial institutions. It is concluded that the nature of the financial asset transferred i.e. whether it is NPA or not is not such a material condition so as to make the agreement invalid. We may add here that as per para 2.1 (a) of the assignment deed dated 21.03.2012, (page 237 of the petition) it is stated that the agreement to assign is in consideration of the assignee having deposited the purchase consideration in the Escrow Account and therefore, the assignment is for valuable consideration received. Further, as para 3.1 of the assignment deed dated 21.03.2012, HSBC has represented and warranted to the petitioner that as on the date of the deed and with reference to the facts and circumstances then existing, the loans are non performing assets and have been duly and validily classified as such, in accordance with the guidelines issued by RBI in this regard and all applicable law. The breach of representation regarding the loan being non performing asset is a matter between the petitioner and HSBC - In the present case, the respondent cannot seek to take benefit of whether the assigned debt is a NPA and the matter lies between the petitioner and HSBC. The petition is, therefore, admitted under Section 7(5) (a) of the Code and the moratorium is declared for prohibiting all of the following in terms of sub-section (1) of Section 14 of the Code.
Issues Involved:
1. Territorial Jurisdiction 2. Default in Loan Repayment 3. Assignment of Debt Legality 4. RBI Guidelines Compliance 5. Fraud and Settlement Allegations 6. Financial Creditor Status 7. Moratorium Declaration Issue-wise Detailed Analysis: 1. Territorial Jurisdiction: The respondent was incorporated on 29.09.2000 and its registered office is in Himachal Pradesh, falling within the territorial jurisdiction of the Chandigarh Bench of the Tribunal. 2. Default in Loan Repayment: The respondent defaulted on the repayment of loan facilities granted by HSBC, leading to the classification of its account as NPA on 01.03.2012. HSBC assigned the debt to the petitioner on 21.03.2012. Despite issuing demand notices under the SARFAESI Act and recall notices, the respondent failed to repay the loan amount, leading to the filing of the present petition. 3. Assignment of Debt Legality: The respondent contested the legality of the assignment, arguing it was against agreements with HSBC and RBI guidelines. The Tribunal found that the assignment was for valuable consideration and that any breach of representation regarding the loan being an NPA was a matter between HSBC and the petitioner. 4. RBI Guidelines Compliance: The respondent argued that the assignment violated RBI guidelines, as the account could not be classified as NPA on 01.03.2012. The Tribunal noted that the guidelines allow the sale of both NPA and standard assets under certain conditions. The Tribunal concluded that the nature of the financial asset (NPA or not) was not material to the validity of the assignment. 5. Fraud and Settlement Allegations: The respondent alleged fraud and settlement between HSBC, the petitioner, and GLAM without its consent. The Tribunal found no substantial evidence to support these allegations, noting that the respondent had not taken further action to clarify the substantial transaction entries in its account. 6. Financial Creditor Status: The Tribunal held that the petitioner is a financial creditor under Section 5(7) of the Code, as the debt was legally assigned by HSBC. The conditions under Section 7(5)(a) of the Code were satisfied, proving the occurrence of default, completeness of the application, and no pending disciplinary proceedings against the proposed Resolution Professional. 7. Moratorium Declaration: The petition was admitted under Section 7(5)(a) of the Code, and a moratorium was declared prohibiting the institution or continuation of suits, transferring or disposing of assets, foreclosure actions, and recovery of property by owners or lessors. The supply of essential goods or services to the corporate debtor was directed to continue during the moratorium period. Conclusion: The Tribunal admitted the petition, declared a moratorium, and scheduled a subsequent hearing for appointing the Interim Resolution Professional and issuing further directions. The judgment comprehensively addressed the legality of the debt assignment, compliance with regulatory guidelines, and the financial creditor status of the petitioner.
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