2019 (10) TMI 1295 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - The petitioner-financial creditor had disbursed money to the respondent-corporate debtor. It is accordingly held that the respondent-corporate debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees one lakh. Thus, the petition warrants admission as it is complete in all respects. After a conjoint reading of the aforesaid provision along with rule 4(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, 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. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Maintainability of the petition under section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Determination of the amount claimed as "financial debt".
3. Compliance with procedural requirements for initiating corporate insolvency resolution process (CIRP).
4. Allegations of misuse of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Maintainability of the petition under section 7 of the Insolvency and Bankruptcy Code, 2016:
The petitioner, claiming to be a financial creditor, filed the 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. The corporate debtor raised a preliminary objection to the maintainability of the petition, questioning the material facts on which the petition was based. The respondent argued that the amount claimed was not a "financial debt" within the meaning of section 5(8) of the Code.

2. Determination of the amount claimed as "financial debt":
The petitioner disbursed ?20,46,500 to the respondent-company as a director, following a resolution passed by the company's board of directors on September 1, 2015. The resolution authorized the directors to take necessary unsecured loans from shareholders, directors, and related parties to clear overdue amounts and continue construction. The petitioner provided evidence, including bank statements and balance sheets, showing that the amount was disbursed to the Greater Noida Industrial Development Authority (GNIDA) on behalf of the company. The Tribunal referenced the judgment in Shailesh Sangani v. Joel Cardoso, which clarified that a promoter, shareholder, or director could be a creditor, and the amount disbursed without interest could still be considered a "financial debt" if it was against the consideration for the time value of money. Thus, the amount claimed by the petitioner was determined to be a "financial debt" under the Code.

3. Compliance with procedural requirements for initiating corporate insolvency resolution process (CIRP):
The petition included details of the financial debt, dates of disbursement, and documents substantiating the amount claimed. The financial creditor proposed the name of Mr. Debashis Nanda as the insolvency professional, and his written communication and registration certificate were submitted. The Tribunal found that the provisions of section 7(2) and (5) of the Code were complied with, and the application under sub-section (2) of section 7 was complete. The Tribunal admitted the petition and appointed Mr. Debashis Nanda as the interim resolution professional (IRP). The IRP was directed to make a public announcement regarding the admission of the application and declare a moratorium in terms of section 14 of the Code. The financial creditor was directed to deposit ?2 lakhs with the IRP for expenses, and the ex-management was instructed to provide all documents and information to the IRP within a week.

4. Allegations of misuse of the Insolvency and Bankruptcy Code, 2016:
The respondent alleged that the petitioner and his family abused the process of the Code by wearing a cloak of a "financial creditor" after being forced to resign as directors/shareholders. The respondent claimed that the proceedings were initiated with mala fide intent. The Tribunal noted that the Regional Director's report indicated certain violations of the Companies Act by the petitioner. However, the Tribunal focused on whether the loan advanced by the petitioner remained unpaid, which constituted a default. The Tribunal concluded that any violations of the Companies Act would not affect the admission of the petition, as the amount deposited by the petitioner was undisputed and supported by the company's resolution. The objection raised by the respondent was rejected.

Conclusion:
The Tribunal admitted the petition, appointed Mr. Debashis Nanda as the IRP, declared a moratorium, and directed compliance with procedural requirements. The allegations of misuse of the Code were dismissed, and the focus remained on the unpaid financial debt and compliance with the Code's provisions.