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2019 (7) TMI 1723 - 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 - Financial Creditor - Financial Debt - HELD THAT - The procedure in relation to the initiation of Corporate Insolvency Resolution Process by the Financial Creditor is delineated under Section 7 of the Code, wherein only Financial Creditor / Financial Creditors can file an application. As per Section 7(1) of the Code, an application could be maintained by a Financial Creditor either by itself or jointly with other Financial Creditors. In the present case applicant Central Bank of India had sanctioned and disbursed several loan facilities by entering in to loan agreements with the original borrower, which are recoverable with applicable interest. The corporate debtor had undertaken the liability of the borrower in respect of the demerged undertaking including the liability to pay relevant interest. The loan was clearly 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 interest. In that view of the matter not only the present claim comes within the purview of 'Financial Debt but also the applicant bank can clearly be termed as 'Financial Creditor' of the respondent corporate debtor 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 - In the present case the respondent corporate debtor has admitted in its letter dated 19.11.2018 that it owes ₹ 21.55 Crores to the applicant Central Bank of India. In addition, applicant bank has filed the relevant statement of accounts duly certified in accordance with Bankers' Books Evidence Act, 1891 as per the requirement of Form 1-part V column 7 of the application. Certified copy of statement of accounts pertaining to various loan facilities, kept during the course of banking business basing on which the claim has been raised can be termed as sufficient evidence of the financial debt. 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 including the admission letter clearly goes to show that respondent has committed default in repayment of the outstanding loan amount - the objection of respondent that applicant is not a financial creditor and that there has been no default on their part cannot sustain. Respondent has raised another objection that the application preferred in Form-1 is defective - Such insignificant technical objections are only to be iron out and cannot be a ground to reject the application filed under Section 7 of the Code. The material placed on record including the letter of respondent showing transfer of liability confirms that the respondent corporate debtor committed default in repayment of the financial debt. On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. It is also seen that there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that 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. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Transfer of liability through a Scheme of Demerger. 3. Admission of financial debt and default by the corporate debtor. 4. Compliance with procedural requirements for initiating Corporate Insolvency Resolution Process (CIRP). 5. Appointment of Interim Resolution Professional (IRP). 6. Declaration of moratorium. Detailed Analysis: 1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016: The Central Bank of India filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s. RS Ingot and Billet Private Limited (the corporate debtor). The application was filed due to the corporate debtor's failure to repay the financial debt. 2. Transfer of liability through a Scheme of Demerger: The financial debt originated from loans sanctioned to M/s. Abhinav Steel and Power Limited, which defaulted on repayments, leading to its accounts being declared non-performing assets (NPA). A Scheme of Demerger was approved by the National Company Law Tribunal (NCLT), New Delhi, on 27.11.2017, transferring the 'Furnace and Rolling Division 1' of M/s. Abhinav Steel and Power Limited to M/s. RS Ingot and Billet Private Limited. Consequently, the liability to repay the loans of 'Furnace and Rolling Division 1' was transferred to the corporate debtor. 3. Admission of financial debt and default by the corporate debtor: The Central Bank of India claimed an outstanding amount of ?21,60,57,478/- as of 30.11.2018. The corporate debtor disputed the demand, alleging it was erroneous and barred by limitation. However, the corporate debtor admitted the transfer of assets and liabilities in a letter dated 19.11.2018, confirming the loans of ?21.55 Crores were transferred to it. 4. Compliance with procedural requirements for initiating CIRP: The Tribunal examined whether the application met the criteria under Section 7 of the Code, including the existence of default, completeness of the application, and absence of disciplinary proceedings against the proposed IRP. The Tribunal found that the application was complete, the default was established, and there were no pending disciplinary proceedings against the proposed IRP. 5. Appointment of Interim Resolution Professional (IRP): The applicant proposed Mr. Shravan Kumar Vishnoi as the IRP, who agreed to the appointment and provided the necessary declarations. The Tribunal appointed Mr. Vishnoi as the IRP and directed the Financial Creditor to deposit ?1 Lac with the IRP to cover initial expenses. 6. Declaration of moratorium: The Tribunal declared a moratorium under Section 14 of the Code, imposing prohibitions on: - Institution or continuation of suits or proceedings against the corporate debtor. - Transferring or disposing of any assets of the corporate debtor. - Foreclosing or enforcing any security interest. - Recovering any 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. Conclusion: The Tribunal admitted the application under Section 7 of the Code, initiated the CIRP against the corporate debtor, appointed Mr. Shravan Kumar Vishnoi as the IRP, and declared a moratorium. The Tribunal directed the IRP to perform his duties as per the Code and ordered the office to communicate the order to relevant parties and update the status of the corporate debtor with the Registrar of Companies.
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