2019 (4) TMI 1751 - Tri - Insolvency and Bankruptcy

Maintainability of petition - Initiation of Corporate Insolvency Resolution Process - Section 7 of the Insolvency and Bankruptcy Code, 2016 - defaults in payment of the monthly instalment due and payable by the Corporate Debtor - HELD THAT - All requirements of Section 7 of the Code for initiation of Corporate Insolvency Resolution Process by a Financial Creditor stand fulfilled. In that regard, the application is complete as per the requirements of Section 7 (2) of the Code and other conditions prescribed by Rule 4 (1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. There is overwhelming evidence to prove default and name of the resolution professional has also been clearly specified. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of the Code - We are satisfied that a default amounting to crores of rupees has occurred within the meaning of Section 4 of the Code and the application under sub-section 2 of Section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. Thus, the application warrant admission as it is complete in all respects. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Validity of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Allegations of suppression of material facts and misstatements by the Financial Creditor.
3. Dispute regarding the rate of interest and outstanding dues.
4. Declaration of the account as Non-Performing Asset (NPA).
5. Compliance with procedural requirements for initiating Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Validity of the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Financial Creditor, M/s. Indiabulls Housing Finance Limited, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against BHA Associates Private Limited (the Corporate Debtor). The application was supported by a Board Resolution authorizing Mr. Devbrat Mitra to sign and submit the petition. The Financial Creditor proposed Mr. Pawan Kumar Agarwal as the Resolution Professional, who satisfied the requirements of Section 7(3)(b) of the Code. The Tribunal found that the application was complete and met all the procedural requirements under Section 7(2) and Section 7(5) of the Code.

2. Allegations of Suppression of Material Facts and Misstatements:
The Corporate Debtor opposed the petition, arguing that the Financial Creditor had suppressed material facts and made deliberate misstatements regarding the outstanding dues and the rate of interest. The Corporate Debtor claimed that the interest rate was agreed to be reduced from 16.50% to 12% upon payment of a premium, as per a letter dated 16.07.2010. However, the Financial Creditor denied receiving this letter and maintained that the interest rate remained floating. The Tribunal noted that the amendatory agreement dated 14.07.2010 indicated a floating interest rate and found no evidence to support the Corporate Debtor's claims of suppression or misstatements.

3. Dispute Regarding the Rate of Interest and Outstanding Dues:
The Corporate Debtor argued that the Financial Creditor had charged excessive interest and failed to reconcile the accounts despite repeated reminders. The Financial Creditor, in its rejoinder, stated that the interest was charged according to the loan agreement and the amendatory agreement. The Tribunal examined the amendatory agreement, which specified a floating interest rate of 12% at the time of execution. The Tribunal found that the Corporate Debtor had failed to repay the loan installments as per the terms of the agreement, and the Financial Creditor's claims were supported by the statement of accounts.

4. Declaration of the Account as Non-Performing Asset (NPA):
The Corporate Debtor challenged the declaration of its account as NPA, arguing that it was in violation of RBI guidelines. The Tribunal, citing the National Company Law Appellate Tribunal's decision in Ranjit Kapoor v. Asset Reconstruction Company (India) Ltd., held that the provision of NPA relates to the SARFAESI Act, 2002, and has no bearing on the Code. The Tribunal emphasized that the primary consideration under Section 7 is whether there is a debt due and a default in payment. The Tribunal found that the Corporate Debtor had defaulted in repaying the loan, satisfying the requirements for initiating CIRP.

5. Compliance with Procedural Requirements for Initiating CIRP:
The Tribunal confirmed that the application was filed in the prescribed form and manner, accompanied by the necessary details and evidence of default. The Tribunal noted that the Financial Creditor had provided overwhelming evidence of default, and the proposed Resolution Professional had no disciplinary proceedings pending against him. The Tribunal directed the Interim Resolution Professional to make a public announcement regarding the admission of the application and declared a moratorium in terms of Section 14 of the Code, imposing prohibitions on suits, asset transfers, and recovery actions against the Corporate Debtor.

Conclusion:
The Tribunal admitted the petition, appointing Mr. Pawan Kumar Agarwal as the Interim Resolution Professional and directing the Financial Creditor to deposit ?2 lakhs to cover the expenses. The Tribunal emphasized the need for cooperation from all parties involved and directed the Interim Resolution Professional to perform his functions with integrity and in accordance with the Code. The office was instructed to communicate the order to the relevant parties and update the status of the Corporate Debtor on the Registrar of Companies' website.