2019 (6) TMI 1565 - 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 - Financial Debt - Financial Creditor - HELD THAT - The expressions Financial Creditor and Financial debt have been defined in Section 5 (7) and Section 5 (8) of the Code and precisely Financial debt is a debt along with interest, if any, which is disbursed against the consideration for time value of money. In the present case applicant sole proprietor had disbursed the loan amount of ₹ 43,00,000 directly in the bank account of the corporate debtor through RTGS. The corporate debtor had executed MOU in favor applicant for repayment of the loan amount with additional amount of ₹ 5,00,000/- as consideration against the time vale of money. The corporate debtor in order to secure its debt also issued two cheques in favour of applicant. It is thus seen that 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 the consideration amount - thus, 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 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. What is material is that the default is at least 1 lakh. In view of Section 4 of the Code, the moment default is of Rupees one lakh or more, the application to trigger Corporate Insolvency Resolution Process under the Code is maintainable - It is thus seen that the applicant 'financial creditor' has placed on record evidence in support of the claim as well as to prove the default - The corporate debtor is entitled to point out to the Adjudicating Authority that a default has not occurred; in the sense that a debt, which may also include a disputed claim is not due i.e. it is not payable in law or in fact. However, despite service respondent preferred to remain absent and the claim of the petitioner remained undisputed. It is pertinent to mention here that the Code requires the adjudicating authority to only ascertain and record satisfaction in a summary adjudication as to the occurrence of default before admitting the application. The material on record clearly goes to show that respondent had availed the loan and has committed default in repayment of the outstanding loan amount. The availed loan having not paid in full as per the mutually agreed contract, the default of debt is apparent. The present application is complete in all respect and the applicant financial creditor is entitled to claim its outstanding financial debt 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.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Financial Creditor's claim and evidence of default
3. Appointment of Interim Resolution Professional (IRP)
4. Declaration of moratorium
5. Duties and responsibilities of the IRP

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The application was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, to trigger CIRP against the respondent company, M/s. Goldstar Impex Private Limited. The Tribunal noted that it has territorial jurisdiction over the NCT of Delhi, where the corporate debtor's registered office is located.

2. Financial Creditor's Claim and Evidence of Default:
The applicant, a sole proprietor of Uma International Trading Company, claimed to be the financial creditor for a short-term loan of ?43,00,000 disbursed to the corporate debtor on 24.08.2018. The loan was for the urgent purchase of 16,000 pieces of A+ Grade Panels for 32" LED TVs. The corporate debtor executed a Memorandum of Understanding (MOU) promising repayment with a lump-sum interest of ?5,00,000 by 29.08.2018 and issued two cheques as security. The cheques were returned unpaid with the remark "payment stopped by Drawer." Despite a demand notice and partial payments, the corporate debtor defaulted on the remaining amount. The Tribunal found that the loan was disbursed against the consideration for time value of money, thus qualifying as a "financial debt" under the Code. The applicant provided sufficient evidence to prove the default.

3. Appointment of Interim Resolution Professional (IRP):
The applicant proposed Mr. Chandra Kumar Jain as the IRP, who agreed to the appointment and declared no pending disciplinary proceedings against him. The Tribunal found that the application complied with Section 7(3)(b) of the Code, which mandates the financial creditor to propose the name of an IRP.

4. Declaration of Moratorium:
The Tribunal declared a moratorium under Section 14 of the Code, imposing prohibitions on:
(a) Institution or continuation of suits or proceedings against the corporate debtor.
(b) Transferring or disposing of any assets of the corporate debtor.
(c) Actions to foreclose or enforce any security interest.
(d) Recovery of property occupied by the corporate debtor.
The moratorium does not apply to transactions notified by the Central Government or essential goods/services to the corporate debtor.

5. Duties and Responsibilities of the IRP:
The IRP is directed to perform functions as per Sections 15, 17, 18, 19, 20, and 21 of the Code with dedication and honesty. The personnel connected with the corporate debtor must cooperate with the IRP. The IRP is responsible for protecting and preserving the value of the corporate debtor's property and managing day-to-day affairs.

Conclusion:
The Tribunal admitted the application under Section 7(5)(a) of the Code, appointed Mr. Chandra Kumar Jain as the IRP, and directed a public announcement of the CIRP initiation. The moratorium was declared, and the IRP was instructed to perform duties in accordance with the Code. The office was directed to communicate the order to relevant parties and update the status on the Registrar of Companies' website.

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