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2019 (6) TMI 1588 - 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 - HELD THAT - The Corporate Debtor failed to create security within the stipulated period of 120 days, i.e., by 13.10.2018. The Petitioner Bank issued a letter dated 14.10.2018 demanding repayment of the credit facilities as the Corporate Debtor failed to create security in favour of the Petitioner within the stipulated period. The letter dated 14.10.2018 issued to the Corporate Debtor and the personal guarantors of the Agreement dated 11.06.2018 is annexed to the Petition. The Petitioner issued a letter dated 16.10.2018 to the Corporate Debtor and its guarantors seeking payment of the instalments of principal and interest amounts. The Corporate Debtor has not tendered any response and has taken least efforts to make the necessary payments to the Financial Creditor. The Petitioner on 29.10.2018 issued letter recalling the entire loan to the Corporate Debtor and subsequently on 01.11.2018 invoked guarantees to the Agreement dated 11.06.2018 to take action against the Guarantors. Copies of letter dated 29.10.2018 and 01.11.2018 are annexed to the Petition. The Sanction Letter dated 05.06.2018, the Master Facility Agreement dated 11.06.2018, and the CRILC Report establish that the Financial Creditor issued a loan to the Corporate Debtor and the same is in default. Moreover, the Corporate Debtor has admitted its liability in a letter dated 07.06.2018, issued by the Corporate Debtor to the State Bank of India. The Corporate Debtor has failed to maintain the financial discipline to repay the loan amounts and has not taken any efforts to make the necessary payments - Application under sub-section (2) of Section 7 of I B Code, 2016 is complete - The existing financial debt of more than rupees one lakh against the corporate debtor and its default is also proved. Petition admitted - moratorium declared.
Issues:
1. Petition under Section 7 of Insolvency & Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process (CIRP). 2. Default in repayment by the Corporate Debtor leading to the financial creditor's petition. 3. Failure of the Corporate Debtor to create and perfect security as required. 4. Legal actions taken by the Financial Creditor against the Corporate Debtor. 5. Admission of liability by the Corporate Debtor. 6. Appointment of an Interim Resolution Professional. Issue 1: Petition under Section 7 of I&B Code for CIRP The petition was filed by IDFC First Bank Limited against Ashapura Intimates Fashion Limited under Section 7 of the Insolvency & Bankruptcy Code, 2016, due to a total default of &8377; 40,13,35,178 as on 20.11.2018. The petition was admitted, and a moratorium under Section 14 of the I&B Code was declared. Issue 2: Default in Repayment The Corporate Debtor failed to create and perfect security in favor of the Financial Creditor, leading to demands for repayment. Despite multiple notices and demands, the Corporate Debtor did not make necessary payments, resulting in the Financial Creditor recalling the entire loan and invoking guarantees. Issue 3: Failure to Create Security The Corporate Debtor did not create security within the stipulated period, as required under the loan agreement. The Financial Creditor demanded repayment due to the failure to create security, and subsequent legal actions were taken against the Corporate Debtor and the guarantors. Issue 4: Legal Actions Taken The Financial Creditor took legal actions, including recalling the loan, demanding repayment, and invoking guarantees against the Corporate Debtor and the guarantors. The Corporate Debtor's failure to respond or make payments led to the initiation of insolvency proceedings. Issue 5: Admission of Liability The Corporate Debtor admitted its liability in a letter to the State Bank of India, confirming the financial debt taken from the Financial Creditor. The CRILC report and other documents supported the existence of the debt and default by the Corporate Debtor. Issue 6: Appointment of Interim Resolution Professional Mr. Kashyap Vaidya was proposed as the Interim Resolution Professional to carry out the functions under the I&B Code. The application under Section 7 of the I&B Code was deemed complete, and the petition for initiating the corporate insolvency resolution process was admitted. This comprehensive analysis covers the key issues involved in the judgment, detailing the events leading to the initiation of insolvency proceedings against the Corporate Debtor.
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