2018 (4) TMI 1748 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor - commitment of default - outstanding-financial debt or not - HELD THAT - Due to the default of repayment of loan the IDBI Bank issued a Notice of recalling loans dated 12th June.?014. In the said Notice of recall the loan agreements entered into and various facilities granted along with Rupee Term Loan agreement was discussed and finally communicated that since the default of non-payment committed by the corporate debtor the Bank has become entitled to Recall its entire Principal amount and Interest-amount outstanding against the Debtor. All the facts have duly established the Debt due against the Financial Debtor as well as the default committed in non-payment. Since the default in repayments is established the Petition deserves to be Admitted - petition admitted - moratorium declared.

Summary

Issues:
1. Capacity of the applicant as a "Financial Creditor" under Section 7 of the insolvency Code.
2. Default in payment of financial debt by the Corporate Debtor.
3. Background and operations of the Debtor Company.
4. Revival letter issued by the Debtor to the Bank.
5. Notice of recalling loans issued by the IDBI Bank.
6. Decision to issue notice under Section 13(2) of the SARFAESI Act.
7. Order passed by DRT Karnataka classifying the debt as Non-Performing Assets.
8. Filing of Petition under section 7 of the Insolvency & Bankruptcy Code, 2016.
9. Existence of Tax Liabilities and Auditor's qualifications.
10. Proposal for the Insolvency Resolution Professional (IRP).
11. Admission of the Petition and appointment of the IRP.
12. Commencement of Moratorium under section 14 of the Code.

Analysis:

1. The judgment addresses the capacity of the applicant, IDBI Bank, as a "Financial Creditor" under Section 7 of the insolvency Code. The bank filed a Petition against the Corporate Debtor for a financial debt amounting to a significant sum, including principal and interest, establishing the default in payment.

2. The background and operations of the Debtor Company, engaged in manufacturing cotton fabrics and shirting, were detailed in the judgment. The company's incorporation details and various units were highlighted to provide context to the financial transactions in question.

3. The judgment discusses the revival letter issued by the Debtor to the Bank, requesting the revival of loan facilities and acknowledging the existing liability, which further solidified the default in repayment leading to subsequent actions by the Bank.

4. Details of the Notice of recalling loans issued by IDBI Bank, citing defaults in payment by the Corporate Debtor, were outlined. The Bank's decision to issue a notice under Section 13(2) of the SARFAESI Act was also mentioned, indicating the escalating measures taken due to non-payment.

5. The judgment references an order passed by DRT Karnataka classifying the debt as Non-Performing Assets and holding the Debtor liable to pay the entire loan amount, emphasizing the financial default and the legal implications thereof.

6. The Petition filed under section 7 of the Insolvency & Bankruptcy Code, 2016, was discussed in detail, highlighting the grounds for initiating the Corporate Insolvency Resolution Process against the Corporate Debtor based on the established default in repayments.

7. The existence of Tax Liabilities and Auditor's qualifications were noted, underscoring additional financial complexities surrounding the case and the need for a structured resolution process.

8. The proposal for the appointment of the Insolvency Resolution Professional (IRP) was made, with detailed information provided regarding the proposed IRP's credentials and consent for the assignment.

9. The judgment concludes with the admission of the Petition and the appointment of the IRP, initiating the Corporate Insolvency Resolution Process and commencing the Moratorium under section 14 of the Code to manage the resolution proceedings effectively. The judgment emphasizes the implications and restrictions imposed during the Moratorium period for the benefit of all stakeholders involved in the insolvency resolution process.