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2019 (3) TMI 1693 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment - On the ground that huge amounts are outstanding it is claimed that the respondent corporate debtor has become commercially insolvent and accordingly it is prayed for initiation of corporate insolvency resolution process against the respondent company by admitting the present application - HELD THAT - The procedure in relation to the Initiation of Corporate Insolvency Resolution Process by the Financial Creditor is delineated under Section 7 of the Code wherein only Financial Creditor / Financial Creditors can file an application. As per Section 7 (I) of the Code an application could be maintained by a Financial Creditor either by itself or jointly with other Financial Creditors - The expressions Financial Creditor and Financial debt have been defined in Section 5 (7) and 5 (8) of the Code and precisely Financial debt is a debt along with interest if any which is disbursed against the consideration for time value of money. In the present case PNB 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. 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 bank can clearly be termed as Financial Creditor so as to prefer the present application under Section 7 of the Code. It is pertinent to mention here that 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. The material on record clearly goes to show that respondent had availed the loan facilities and has committed default in repayment of the outstanding loan amount - In the facts it is seen that the applicant bank clearly comes within the definition of Financial Creditor. The material placed on record further confirms that applicant financial creditor had disbursed various loan facilities to the respondent corporate debtor and the respondent has availed the loan and committed default in repayment of the financial debt. On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. It is also seen that there is no disciplinary proceeding pending against the proposed IRP. The present application is admitted - moratorium declared.
Issues Involved:
1. Maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Pendency of winding-up proceedings before the High Court. 3. Requirement to include other consortium banks in the application. 4. Existence of financial debt and default. 5. Appointment of Interim Resolution Professional (IRP). 6. Declaration of moratorium under Section 14 of the Code. Detailed Analysis: 1. Maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016: The application was filed by Punjab National Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the respondent company. The Tribunal noted that the application was complete, the default had occurred, and no disciplinary proceedings were pending against the proposed IRP. The Tribunal emphasized that the application must be admitted if these criteria are met, as per the Supreme Court's observation in Mobilox Innovations Private Limited V. Kirusa Software Private Limited. 2. Pendency of winding-up proceedings before the High Court: The respondent company argued that the application under Section 7 was not maintainable due to ongoing winding-up proceedings before the High Court. The Tribunal referred to the Supreme Court's judgments in Jaipur Metals and Electricals Employees Organization vs. Jaipur Metals and Electricals Ltd. and Ors. and Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd., which clarified that Section 7 applications under the Code are independent proceedings and can proceed irrespective of pending winding-up petitions. The Tribunal concluded that the pendency of winding-up proceedings does not bar the initiation of CIRP under Section 7 of the Code. 3. Requirement to include other consortium banks in the application: The respondent contended that the application was improper as it did not include other consortium banks. The Tribunal highlighted that under Section 7 (1) of the Code, a financial creditor can file an application either by itself or jointly with other financial creditors. The Tribunal also noted that inter-se agreements between financial creditors cannot override the provisions of the Code or take away the right of any creditor to file an application under Section 7. The Tribunal cited the NCLAT's decision in Asian Natural Resources (India) v. IDBI Bank Limited, which supported this view. 4. Existence of financial debt and default: The Tribunal examined the evidence presented by the applicant, including loan agreements, guarantee deeds, mortgage deeds, and certified statements of accounts. The Tribunal found that the applicant had provided overwhelming evidence to support the existence of financial debt and default. The Tribunal noted that the respondent had availed various loan facilities, executed necessary documents, and failed to repay the outstanding amounts, leading to the classification of the account as a Non-Performing Asset (NPA). 5. Appointment of Interim Resolution Professional (IRP): The applicant proposed the name of Shri Arvinder Singh as the Interim Resolution Professional (IRP), who had agreed to the appointment and provided the necessary declarations and disclosures. The Tribunal found no disciplinary proceedings pending against him and satisfied the requirement of Section 7 (3) (b) of the Code. Consequently, Shri Arvinder Singh was appointed as the IRP. 6. Declaration of moratorium under Section 14 of the Code: The Tribunal declared a moratorium under Section 14 of the Code, which included prohibitions on the institution or continuation of suits or proceedings against the corporate debtor, transferring or disposing of its assets, and actions to foreclose or enforce security interests. The Tribunal clarified that the moratorium does not apply to transactions notified by the Central Government or the supply of essential goods or services to the corporate debtor. The IRP was directed to make a public announcement regarding the admission of the application and to perform his duties as per the Code. Conclusion: The Tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiated the Corporate Insolvency Resolution Process against the respondent company, appointed Shri Arvinder Singh as the Interim Resolution Professional, and declared a moratorium in terms of Section 14 of the Code. The Tribunal directed the office to communicate the order to relevant parties and update the status of the corporate debtor on the Registrar of Companies' website.
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