2019 (6) TMI 1566 - 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 - Even without any element of 'assured return' an allottee in the real estate project has to be regarded as a 'Financial Creditor'. The petitioner eminently fulfills the condition - The amount has been raised from the petitioner/allottee under a real estate project. In such a situation not only the debt has a commercial effect of borrowings and come within the scope of 'financial debt' but also the petitioner is covered by the definition of expression 'financial creditor' - petitioner being financial creditor can invoke Corporate Insolvency Resolution Process under Section 7 of the code against the respondent corporate debtor in case of default in repayment of financial debt. It is clear that applicant-financial creditor has disbursed the money to the respondent corporate debtor as consideration for purchase of a commercial space. Though a considerable long period has lapsed even the principal amount disbursed has not been repaid by the respondent corporate debtor as per the terms of the Assured Return Agreement. It is accordingly held that 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 warrant admission as it is complete in all respects. Petition admitted - moratorium declared.

Issues Involved:
1. Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code during the pendency of a winding-up petition.
2. Classification of the petitioner as a 'Financial Creditor'.
3. Compliance with the procedural requirements under Section 7 of the Insolvency and Bankruptcy Code.
4. Appointment of Interim Resolution Professional and declaration of moratorium.

Issue-wise Detailed Analysis:

1. Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code during the pendency of a winding-up petition:

The Tribunal addressed the issue of whether a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) is maintainable during the pendency of a winding-up petition before the High Court. The Tribunal referred to the Supreme Court's decision in M/s. Forech India Limited v. Edelweiss Assets Reconstruction Company Limited, which clarified that the IBC would prevail over the Companies Act, 1956, in such scenarios. The Tribunal concluded that the appointment of an Official Liquidator does not bar the maintainability of a petition under Section 7 of the IBC, as the Code would prevail, and the Official Liquidator would answer all queries of the Resolution Professional.

2. Classification of the petitioner as a 'Financial Creditor':

The petitioner entered into an Assured Return Agreement with the respondent for the purchase of IT Space, paying a total amount of ?40,00,000/-. The Tribunal noted that the respondent honored its commitment towards assured returns until November 2015 but failed to continue payments thereafter. The Tribunal referred to the amended definition of 'Financial Debt' under Section 5(8) of the IBC, which includes dues of home buyers and recognizes them as 'Financial Creditors'. The Tribunal concluded that the petitioner, being an allottee under a real estate project, is covered by the definition of 'Financial Creditor' and is entitled to initiate the Corporate Insolvency Resolution Process (CIRP) against the respondent.

3. Compliance with the procedural requirements under Section 7 of the Insolvency and Bankruptcy Code:

The Tribunal examined whether the petition met the procedural requirements under Section 7 of the IBC. The petitioner argued that the petition was complete in all respects, as prescribed by Rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Tribunal was satisfied that the default had occurred, the application was complete, and no disciplinary proceedings were pending against the proposed Interim Resolution Professional (IRP). Consequently, the Tribunal found that the petition fulfilled all requirements under Section 7 of the IBC.

4. Appointment of Interim Resolution Professional and declaration of moratorium:

The Tribunal appointed Mr. Arun Jain as the Interim Resolution Professional (IRP) and declared a moratorium in terms of Section 14 of the IBC. The moratorium would not apply to transactions notified by the Central Government and would ensure the continuation of essential supplies such as water and electricity. The Tribunal directed the IRP to make a public announcement regarding the admission of the petition under Section 7 of the IBC within three days. Additionally, the Financial Creditor was instructed to deposit ?2 lacs with the IRP to cover expenses, subject to adjustment by the Committee of Creditors.

Conclusion:

The Tribunal admitted the petition, appointed Mr. Arun Jain as the IRP, and declared a moratorium. The Tribunal directed the IRP to make a public announcement and the Financial Creditor to deposit ?2 lacs for expenses. The Tribunal also instructed the Registrar of Companies to update the status of the 'Corporate Debtor' on its website.

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