2019 (3) TMI 1663 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor - It is alleged that the respondent corporate debtor defaulted in repayment of dues of the Exim Bank and accordingly, the Exim Bank in terms of the RBI guidelines declared the account of the Corporate Debtor as a Non-Performing Asset - it is claimed that the respondent corporate debtor has become commercially insolvent - HELD THAT - In the present case Exim Bank had sanctioned and disbursed the loan amount recoverable with applicable interest by entering into loan agreements with the corporate debtor. The corporate debtor had borrowed the credit facility against payment of interest as agreed between the parties. The loan was disbursed against the consideration for time value of money with a clear commercial effect of borrowing. The outstanding debts have since been assigned in favour of the applicant. Moreover, the debt claimed in the present application includes both the component of outstanding principal and interest. In that view of the matter not only the present claim comes within the purview of 'Financial Debt' but also the applicant being the assignee can clearly be termed as 'Financial Creditor' so as to prefer the present application under Section 7 of the Code. The present application under Section 7 of the Code for initiative Corporate Resolution Insolvency Process has been filed by petitioner financial creditor in Form-1 in terms of Rule 4 of Insolvency and Bankruptcy (application to Adjudicating Authority) Rules, 2016 accompanied with required information, documents and records as prescribed under the Rules - There appears to be no infirmity in the application form, being complete in all respect. In terms of Section 7 (5) (a) of the Code, the present application is admitted.

Issues Involved:
1. Jurisdiction and admissibility of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Validity of the Deed of Assignment.
3. Qualification of the applicant as a "financial creditor."
4. Existence and quantification of the default.
5. Appointment of the Interim Resolution Professional (IRP).
6. Declaration of moratorium.

Detailed Analysis:

1. Jurisdiction and Admissibility of the Application:
The application was filed by M/s Edelweiss Asset Reconstruction Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against Margra Industries Limited, the corporate debtor. Since the registered office of the corporate debtor is in New Delhi, the Tribunal has territorial jurisdiction over the matter as per sub-section (1) of Section 60 of the Code.

2. Validity of the Deed of Assignment:
The respondent challenged the Deed of Assignment executed by Exim Bank in favor of the applicant. The applicant countered that the assignment deed was duly stamped and registered, making it fully legal and valid. Under sub-section (7) of Section 5 of the Code, a "financial creditor" includes a person to whom a financial debt has been legally assigned or transferred.

3. Qualification of the Applicant as a "Financial Creditor":
The respondent alleged that the applicant does not qualify as a "financial creditor." However, the Tribunal noted that Exim Bank had assigned its rights, title, interest, and benefits in respect of the debts against the corporate debtor to the applicant. Since the outstanding loan amount was duly assigned, the applicant falls within the definition of a "financial creditor" as per Section 5(7) of the Code.

4. Existence and Quantification of the Default:
The respondent claimed that excess interest had been charged and disputed the amount claimed. The Tribunal clarified that disputes over the quantum of default cannot be grounds for rejecting an application under Section 7. The Tribunal's role is to ascertain the occurrence of default, not to determine the exact amount due. The applicant provided substantial evidence, including loan agreements, guarantee deeds, mortgage deeds, and a one-time settlement agreement, to support the claim of default amounting to ?44,20,38,989.20.

5. Appointment of the Interim Resolution Professional (IRP):
The applicant proposed Mr. Rajender Kumar Girdhar as the Interim Resolution Professional, who met the requirements of Section 7(3)(b) of the Code. The Tribunal, satisfied with his qualifications and the absence of any disciplinary proceedings against him, appointed him as the IRP.

6. Declaration of Moratorium:
The Tribunal declared a moratorium in terms of Section 14 of the Code, prohibiting:
- The institution or continuation of suits or proceedings against the corporate debtor.
- Transferring, encumbering, alienating, or disposing of any assets of the corporate debtor.
- Any action to foreclose, recover, or enforce any security interest.
- Recovery of any property by an owner or lessor where such property is occupied by the corporate debtor.

The IRP is directed to make a public announcement regarding the admission of the application and to perform all functions as per the Code, Rules, and Regulations. The personnel connected with the corporate debtor are legally obligated to assist the IRP.

Conclusion:
The Tribunal admitted the application under Section 7 of the Code, initiating the Corporate Insolvency Resolution Process against the corporate debtor. The IRP was appointed, and a moratorium was declared, with specific directions for compliance and public notification.

← Previous Next →