2019 (5) TMI 1831 - 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 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 - Admittedly the claim in the present case is based on a decree of a court of law. Respondent company had moved an application no. 1674/2016 for recalling the said decree which was dismissed on 19.05.2017. Even appeal filed by the respondent corporate debtor under Section 20 of the Recovery of Debt due to Banks and Financial Institution act 1993 was dismissed by Debts Recovery Appellate Tribunal. The decree passed in favour of the applicant bank has since become final and binding upon the corporate debtor. Respondent has committed clear default in not paying the amount and interest as per the decree. Once there is a debt and default and the application is complete the Adjudicating Authority is bound to admit the application - In the facts it is seen that the applicant bank clearly comes within the definition of Financial Creditor. There has been default in nonpayment of the decreed amount which has since attained finality. We are also satisfied that the present application is complete in all respect and there is no disciplinary proceeding pending against the proposed IRP. The applicant financial creditor is entitled to claim the decretal amount from the corporate debtor and the respondent corporate debtor has committed clear default in non-payment of the financial debt as per the decree. In terms of Section 7 (5) (a) of the Code the present application is admitted - Moratorium declared.

Summary

Issues Involved:
1. Jurisdiction and Admissibility of Application
2. Compliance with Procedural Requirements
3. Existence of Financial Debt and Default
4. Appointment of Interim Resolution Professional (IRP)
5. Declaration of Moratorium
6. Obligations of the Interim Resolution Professional (IRP)

Issue-wise Detailed Analysis:

1. Jurisdiction and Admissibility of Application:
The application was filed by Corporation Bank 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 initiate the Corporate Insolvency Resolution Process (CIRP) against the respondent company. The Tribunal confirmed its territorial jurisdiction over the National Capital Territory of Delhi, as the registered office of the respondent company is located in New Delhi, satisfying the requirements under sub-section (1) of Section 60 of the Code.

2. Compliance with Procedural Requirements:
The application was submitted in the requisite FORM-1 and included all necessary information and documents, such as details of the financial debt, records, and evidence of default as required under sub-section 3(a) of Section 7 of the Code. The Tribunal found the application to be complete and without infirmity. The applicant also proposed the name of Mr. Manish Agarwal as the Interim Resolution Professional (IRP), who confirmed his willingness to serve and declared that no disciplinary proceedings were pending against him, fulfilling the requirement of Section 7(3)(b) of the Code.

3. Existence of Financial Debt and Default:
The applicant bank had sanctioned a loan of ?50 Crores to the respondent company, which included a cash credit facility and an inland/import letter of credit/buyers credit facility. The respondent company defaulted on repayment, and a decree for ?56,70,74,811.06/- was passed by the Debts Recovery Tribunal, Delhi, on 15.10.2018. Despite the enforceable decree, the respondent failed to pay the decreed amount. The Tribunal noted that the respondent's challenges and difficulties in operation were irrelevant to the CIRP proceedings, as the adjudicating authority's role is limited to ascertaining the occurrence of default and ensuring the application is complete.

4. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Manish Agarwal as the Interim Resolution Professional, as proposed by the applicant. His appointment was confirmed based on his qualifications, willingness to serve, and the absence of any disciplinary proceedings against him. The Tribunal directed the IRP to make a public announcement regarding the admission of the application within three days as prescribed by the IBBI Regulations, 2016.

5. Declaration of Moratorium:
The Tribunal declared a moratorium in terms of Section 14 of the Code, imposing prohibitions on the institution or continuation of suits, transferring or disposing of assets, foreclosing or enforcing security interests, and recovering property from the corporate debtor. The moratorium does not apply to transactions notified by the Central Government or the supply of essential goods or services, nor to sureties in a contract of guarantee to the corporate debtor.

6. Obligations of the Interim Resolution Professional (IRP):
The IRP is required to perform functions as per Sections 15, 17, 18, 19, 20, and 21 of the Code, with utmost dedication and in accordance with the Code, Rules, and Regulations. The personnel connected with the corporate debtor are legally obligated to assist and cooperate with the IRP. The IRP must protect and preserve the value of the corporate debtor's property and can seek appropriate orders from the Tribunal in case of any violations by the ex-management or illegal transactions.

Conclusion:
The Tribunal admitted the application under Section 7(5)(a) of the Code, satisfied that the default had occurred, the application was complete, and no disciplinary proceedings were pending against the proposed IRP. The Tribunal directed the office to communicate the order to all relevant parties and update the status of the corporate debtor on the Registrar of Companies' website.