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2018 (11) TMI 1741 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of debt - existence of default or not - HELD THAT - It is evident from the record that the application has been filed on the Performa prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of IBC. We are satisfied that a default has occurred and the application under sub section 2 of Section 7 is complete. The name of the IRP has been proposed and there are no disciplinary proceedings pending against the proposed Interim Resolution Professional. Application admitted - moratorium declared.
Issues Involved:
1. Whether the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) is maintainable. 2. Whether there was a default in repayment by the Corporate Debtor. 3. Whether the RBI Circular dated 12.02.2018 is applicable to the petitioner. 4. Whether the petition was filed with proper authorization. 5. Whether the amount claimed by the Financial Creditor is accurate. 6. Appointment of the Interim Resolution Professional (IRP). 7. Declaration of Moratorium. Detailed Analysis: 1. Maintainability of Petition under Section 7 of IBC: The Petitioner, claiming to be a financial creditor, filed the petition under Section 7 of the IBC to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The application was found to be complete as per the requirements of Section 7(2) of the IBC and Rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Tribunal was satisfied that a default had occurred, and the application was complete, fulfilling the conditions prescribed under the law. 2. Default in Repayment: The Corporate Debtor had availed a credit facility of Rs. 8.50 Crores from ECL Finance Limited, as per the Loan Agreement dated 25.07.2017. The account of the Corporate Debtor was declared as Non-Performing Asset (NPA) on 31.03.2018. A Loan Recall Notice was issued on 16.07.2018, demanding repayment of Rs. 9,14,34,687/- as of 31.03.2018. The Corporate Debtor admitted the disbursement of the loan and default in repayment due to financial distress caused by market conditions. The Tribunal found overwhelming documentary evidence supporting the default. 3. Applicability of RBI Circular: The Respondent-Corporate Debtor raised an objection based on the RBI Circular dated 12.02.2018, arguing non-compliance by the Petitioner. However, the Financial Creditor-Petitioner contended that the RBI Circular was applicable only to accounts maintained with Scheduled Commercial Banks or All India Financial Institutions, and not to Non-Banking Financial Companies (NBFCs) like the Petitioner. The Tribunal accepted this argument, ruling the RBI Circular inapplicable to the Petitioner. 4. Proper Authorization: The Respondent-Corporate Debtor questioned the authorization for filing the petition. The Petitioner provided a copy of the Board Resolution dated 01.08.2017, authorizing Mr. Dinesh G Kumar to file the petition. The Tribunal found the authorization to be proper and valid. 5. Accuracy of Amount Claimed: The Respondent-Corporate Debtor alleged that the amount claimed was exaggerated. The Petitioner clarified that the amount was calculated based on the terms of the Loan Agreement transparently. The Tribunal found the amount claimed to be accurate and supported by documentary evidence. 6. Appointment of Interim Resolution Professional (IRP): The Financial Creditor proposed Mr. Udayraj Patwardhan as the IRP. His credentials were verified, and no disciplinary proceedings were pending against him. The Tribunal appointed Mr. Udayraj Patwardhan as the IRP, directing him to make a public announcement regarding the admission of the application under Section 7 of the IBC. 7. Declaration of Moratorium: The Tribunal declared a moratorium in terms of Section 14 of the IBC, imposing prohibitions on: - Institution or continuation of suits or proceedings against the Corporate Debtor. - Transferring, encumbering, or disposing of the Corporate Debtor’s assets. - Actions to foreclose, recover, or enforce any security interest. - Recovery of property by an owner or lessor occupied by the Corporate Debtor. The moratorium does not apply to transactions notified by the Central Government or a surety in a contract of guarantee. Essential goods or services to the Corporate Debtor must not be terminated during the moratorium period. Conclusion: The Tribunal admitted the petition under Section 7 of the IBC, appointed Mr. Udayraj Patwardhan as the IRP, and declared a moratorium. The IRP was directed to perform his duties as per the IBC, with all personnel connected to the Corporate Debtor required to cooperate. The office was instructed to communicate the order to relevant parties and the Registrar of Companies (ROC) for compliance.
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