2018 (12) TMI 1815 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make payment of dues - amount due and outstanding or not - HELD THAT - In the present case the consortium banks 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 can clearly be termed as Financial Creditor so as to prefer the present application under Section 7 of the Code. An application of financial creditor under Section 7 of the Code is acceptable so long as the debt is proved to be due and there has been occurrence of existence of default. It is reiterated that the material on record clearly goes to show that respondent had availed the loan facilities and has committed default in repayment of the huge outstanding loan amount - the present application is complete in all respect and the applicant financial creditors are entitled to claim their outstanding financial debts from the corporate debtor and that there has been default in payment of the financial debt. In terms of Section 7 (5) (a) of the Code the present application is admitted - Application admitted - moratorium declared.

Summary

Issues Involved:
1. Jurisdiction of the Tribunal.
2. Authorization of the applicant bank to file the application.
3. Allegation of excess interest charged by banks.
4. Declaration of the corporate debtor's account as NPA.
5. Pendency of other proceedings.
6. Discrepancies in the amount of claim.
7. Completeness and validity of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
8. Appointment of Interim Resolution Professional (IRP).
9. Declaration of moratorium.

Detailed Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal established its jurisdiction over the matter as the respondent company's registered office is located in New Delhi, falling under the territorial jurisdiction of the National Company Law Tribunal, New Delhi Bench, in accordance with sub-section (1) of Section 60 of the Insolvency and Bankruptcy Code, 2016.

2. Authorization of the Applicant Bank:
The applicant, Indian Overseas Bank (IOB), filed the application as the lead bank of a consortium, which included State Bank of India (SBI), Punjab National Bank (PNB), Union Bank of India (UBI), Dena Bank, and Central Bank of India (CBI). The Tribunal referenced the inter se agreement dated 28.09.2013, which authorized IOB to act as the lead bank and file the application on behalf of the consortium. The Tribunal found that IOB had the necessary authorization to file the petition.

3. Allegation of Excess Interest Charged by Banks:
The corporate debtor alleged that the banks had charged excess interest and that the amounts claimed were incorrect. The Tribunal noted that the applicant had provided various loan documents, balance confirmations, demand promissory notes, and indemnity bonds executed by the respondent company. The Tribunal concluded that the loan was properly sanctioned, disbursed, and utilized by the corporate debtor, and the interest was charged as per the terms of the sanction letters.

4. Declaration of the Corporate Debtor's Account as NPA:
The respondent argued that its account had been wrongly declared as a Non-Performing Asset (NPA). The Tribunal clarified that the declaration of an account as NPA under the SARFAESI Act, 2002, was irrelevant to the proceedings under the Insolvency and Bankruptcy Code. The Tribunal's focus was on the existence of a debt and default, not the NPA status.

5. Pendency of Other Proceedings:
The respondent raised an objection regarding the pendency of proceedings under the DRT and SARFAESI Act. The Tribunal held that such proceedings do not impede the initiation of the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Code.

6. Discrepancies in the Amount of Claim:
The Tribunal acknowledged the discrepancies in the claimed amounts due to different dates but emphasized that its role was to ascertain the existence of a default, not to determine the exact amount due. The corporate debtor could raise objections regarding the mismatch of dues before the resolution professional or the committee of creditors.

7. Completeness and Validity of the Application:
The Tribunal found that the application filed by IOB under Section 7 of the Code was complete and in the prescribed format (Form-I). The application included all required details and evidence of default. The Tribunal reiterated that the debt was due, and there was a default of at least Rs. 1 lakh, making the application maintainable under Section 4 of the Code.

8. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Sandeep Kumar Gupta as the Interim Resolution Professional (IRP), noting that he satisfied the requirements of Section 7(3)(b) of the Code and that no disciplinary proceedings were pending against him.

9. Declaration of Moratorium:
The Tribunal declared a moratorium under Section 14 of the Code, prohibiting the institution or continuation of suits or proceedings against the corporate debtor, transferring or disposing of assets, enforcing security interests, and recovering property occupied by the corporate debtor. The moratorium did not apply to transactions notified by the Central Government or the supply of essential goods or services.

Conclusion:
The Tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, and directed the IRP to make a public announcement and perform his duties as per the Code. The Tribunal also communicated the order to the relevant parties and authorities.