2019 (1) TMI 1687 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in making repayment - existence of debt and default or not - Section 7 of the Insolvency and Bankruptcy Code, 2016 - 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 (1) of the Code an application could be maintained by a Financial Creditor either by itself or jointly with other Financial Creditors. Section 7 of the Code thus mandates that only the applicant Financial Creditor has to prove the default In the present case the Petitioners had booked flats for a consideration of ₹ 1,85,92,093/- to the Respondent Corporate Debtor. The various dates of disbursement of the said principal amount including the details of flat have been furnished in the application. The Apartment Buyer Agreement executed has also been placed on record, which reveals that the principal amount has been paid by the Petitioners and has been received by the Respondent Corporate Debtor - Since the arnount has been raised from the petitioners/ allottees under a real estate project, not only the debt has a commercial effect of borrowings and come within the scope of 'financial debt' but also the petitioner comes within the definition of 'financial creditor' - Therefore, petitioner being a financial creditor can invoke Corporate Insolvency Resolution Process under Section 7 of the code against the Respondent Corporate Debtor in case of default in repayment of financial debt. The Form-I filed in the present case under Section 7 of the Code read with Rule 4 of the Rules, shows that the Form is complete in all respect and there is no infirmity in the same. Whether Respondent Corporate Debtor has committed default in payment of the financial debt? - HELD THAT - In the present case Financial debt is outstanding since the year 2016. The Corporate Debtor has not denied the claim of Petitioners and has itself tried to settle the matter and the arnount of default exceeds much more than 1 lakh. In view of Section 4 of the Code, the moment default is Rupees one lakh or more, the petition to trigger Corporate Insolvency Resolution Process under the Code is maintainable. There is sufficient material on record to conclude that Respondent Corporate Debtor has committed default in repayment of the financial debt. The present application is complete and there has been a default in payment of the financial debt and that no disciplinary proceeding is pending against the proposed IRP and therefore, the applicant financial creditor is entitled to initiate Corporate Insolvency Resolution Process under Section 7 of the Code - in terms of Section 7 (5) (a) of the Code, the present application is admitted. Application admitted - moratorium declared.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Determination of the status of the applicants as Financial Creditors.
3. Assessment of default by the Corporate Debtor.
4. Appointment of an Interim Resolution Professional (IRP).
5. Declaration of moratorium under Section 14 of the Code.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The petitioners, claiming to be financial creditors, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (the Code) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, to initiate CIRP against the Corporate Debtor, M/S Krrish Shalimar Projects Private Limited. The Tribunal acknowledged its territorial jurisdiction over the NCT of Delhi.

2. Determination of the status of the applicants as Financial Creditors:
The petitioners, being allottees under a real estate project, booked a flat and made substantial payments to the Corporate Debtor. The Tribunal noted that the definition of "Financial Debt" under Section 5(8) of the Code, amended by the Insolvency and Bankruptcy (Amendment) Ordinance, 2018, includes amounts raised from allottees under a real estate project. Therefore, the petitioners qualify as "Financial Creditors" under the Code.

3. Assessment of default by the Corporate Debtor:
The petitioners claimed that the Corporate Debtor failed to deliver possession of the flat within the stipulated time and subsequently refused to refund the deposited amount. The Corporate Debtor argued that the construction was nearly complete and offered an alternative unit, which was rejected by the petitioners. The Tribunal found that the Corporate Debtor defaulted in repayment of the financial debt, as the amount of default exceeded the statutory limit of one lakh rupees.

4. Appointment of an Interim Resolution Professional (IRP):
The petitioners proposed Mr. Anil Tayal, CA, as the IRP, who accepted the appointment and provided the necessary declarations. The Tribunal appointed Mr. Anil Tayal as the IRP, finding no disciplinary proceedings pending against him.

5. Declaration of moratorium under Section 14 of the Code:
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 or disposing of assets, foreclosing or enforcing security interests, and recovering property occupied by 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 Code, appointed Mr. Anil Tayal as the IRP, declared a moratorium, and directed the IRP to make a public announcement and perform his functions as per the Code. The office was instructed to communicate the order to the relevant parties and authorities.