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2020 (1) TMI 1242 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation - HELD THAT - Nowhere has the Corporate Debtor denied the existence of a debt and its default - Further as consistently held by Hon ble Supreme Court both in M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. 2017 (9) TMI 58 - SUPREME COURT as well as MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED 2017 (9) TMI 1270 - SUPREME COURT after going through the Scheme of I B Code 2016 in depth in relation to an Application under Section 7 filed by a Financial Creditor where there is an existence of a financial debt and its default in excess of 1, 00, 000/- this Tribunal is bound to admit the Application and as a consequence trigger the Corporate Insolvency Resolution Process (CIRP). The plea of the Corporate Debtor that restructuring efforts are afoot with the consortium of bankers cannot be made a ground for delaying the initiation of CIR Process or to keep in abeyance the instant Application as sought for as this Tribunal is required in case of a financial debt which is due and in the event of default as defined under I B Code 2016 is perforce required to admit the Application and the parties including the Corporate Debtor can have recourse during CIR process to submit a plan for restructuring if otherwise not disqualified. The Application as filed by the Financial Creditor is required to be admitted under Section 7 (5) of the I B Code 2016 - Application admitted - moratorium declared.
Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Existence of financial debt and default by Corporate Debtor. 3. Corporate Debtor's defense and restructuring efforts. 4. Appointment of Interim Resolution Professional (IRP). 5. Declaration of moratorium. Issue-wise Detailed Analysis: 1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016: The application was filed by Indian Overseas Bank (referred to as 'Financial Creditor') under Section 7 of the Insolvency and Bankruptcy Code, 2016, against M/s. Coastal Energy Private Limited (referred to as 'Corporate Debtor'). The Financial Creditor sought to initiate the Corporate Insolvency Resolution Process (CIRP), declare a moratorium, and appoint an Interim Resolution Professional (IRP). 2. Existence of financial debt and default by Corporate Debtor: The Financial Creditor claimed an outstanding amount of ?1,77,28,94,303.93 as of 14.03.2019. The Corporate Debtor had availed various credit facilities from the Financial Creditor, including Cash Credit and Letters of Guarantee, which were periodically renewed and enhanced. Despite several efforts and demands by the Financial Creditor, the Corporate Debtor failed to regularize the loan accounts, leading to the classification of the account as Non-Performing Assets (NPA) on 30.06.2016. The Corporate Debtor did not deny the existence of the debt and its default. 3. Corporate Debtor's defense and restructuring efforts: The Corporate Debtor argued that it was involved in multiple government contracts and faced financial stress due to various factors, including rupee depreciation, international coal price correction, and delays in bank disbursals. The Corporate Debtor supported Coastal Energen, a group company, during its financial difficulties. The Corporate Debtor highlighted ongoing restructuring efforts, including a One Time Settlement (OTS) proposal and the Strategic Debt Restructuring (SDR) Process initiated by the Joint Lenders Forum. However, the tribunal held that restructuring efforts could not delay the initiation of the CIRP. 4. Appointment of Interim Resolution Professional (IRP): The Financial Creditor proposed the name of Mr. S. Rajagopal as the IRP. The tribunal appointed him as the IRP to take forward the CIRP of the Corporate Debtor. The IRP was instructed to take necessary steps as per the Insolvency and Bankruptcy Code, 2016, and file a report within 20 days. 5. Declaration of moratorium: Upon admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, the tribunal declared a moratorium as per Section 14(1). The moratorium included the suspension of suits or proceedings against the Corporate Debtor, prohibition on transferring or disposing of assets, and halting actions to enforce security interests. The moratorium would remain effective until the completion of the CIRP or approval of a resolution plan or liquidation order. Conclusion: The application filed by the Financial Creditor was admitted under Section 7 of the Insolvency and Bankruptcy Code, 2016. The tribunal appointed Mr. S. Rajagopal as the IRP and declared a moratorium, initiating the CIRP against the Corporate Debtor. The order emphasized that restructuring efforts could not delay the CIRP and allowed the Corporate Debtor to submit a restructuring plan during the CIRP if not disqualified.
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