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2019 (8) TMI 1481 - AT - Insolvency and BankruptcyMaintainability of application u/s 7 of the Insolvency and Bankruptcy Code, 2016 - outstanding dues on the part of corporate Debtor or not - main plea taken by the Appellant is that there was no default on the part of the Corporate Debtor and therefore, the application under Section 7 was not maintainable - HELD THAT - It was brought to the notice of the Adjudicating Authority that the Financial Creditor in the Recall Notice given on 12th September, 2018 intimated the Corporate Debtor that it failed to comply with the concession mentioned in the Master Restructuring Agreement dated 14th February, 2017. The Bank had issued Recall Notice demanding repayment of Part-B debt of ₹ 78,27,62,198/- within specified date, but the Corporate Debtor failed to repay the loan as demanded by the Financial Creditor . The Corporate Debtor in terms of Clause 7.1 of Event(s) of Default of Master Restructuring Agreement failed to ensure that the Gujarat State Road Development Corporation Limited has purchased equity share of ₹ 210 Crores out of ₹ 410 Crores debt converted into equity within 90 days in terms of Restructuring Agreement thereby defaulted in terms of the Agreement - the debt and default is proved and the Adjudicating Authority did not commit error in admitting Section 7 application under I B Code . Appeal dismissed.
Issues:
Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 based on default by the Corporate Debtor. Analysis: The appeal was filed by the Director of a company against the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, by a Financial Creditor. The Appellant contended that there was no default on the part of the Corporate Debtor, citing a Master Restructuring Agreement reached with lenders. The agreement involved restructuring terms for loan repayment and specific conditions related to a road development project in Gujarat. The Corporate Debtor argued that no default had occurred as per the terms of the Master Restructuring Agreement. The Adjudicating Authority considered the terms of the Common Loan Agreement and the subsequent Master Restructuring Agreement, which outlined events of default and remedies. The Financial Creditor highlighted that the Corporate Debtor failed to comply with the concession mentioned in the Master Restructuring Agreement, leading to a demand for repayment of the loan. The Adjudicating Authority found that the Corporate Debtor had indeed defaulted by failing to ensure the purchase of equity shares by a specified date as per the Restructuring Agreement. This default was considered a breach of the agreement, leading to the admission of the Section 7 application under the Insolvency and Bankruptcy Code. The appeal was dismissed, with the court upholding the decision of the Adjudicating Authority based on the proven debt and default by the Corporate Debtor. In conclusion, the judgment upheld the admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, due to the default by the Corporate Debtor as per the terms of the Master Restructuring Agreement. The detailed analysis of the agreements and events leading to default formed the basis for the decision, ultimately resulting in the dismissal of the appeal.
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