2020 (6) TMI 740 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Corporate Debtor seeking additional time for repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - The Corporate Debtor, has admitted its liability to repay the debt amount and is willing to pay the same. However, it sought for additional time for clearing the financial dues of the Petitioner. On a perusal of records, there is no doubt that there is an admitted debt and a default as per the agreed terms between the two parties. The Petitioner admits that the Debtor has repaid an amount of ₹ 25 lakh against ICD 1 and that the same was renewed on 14.04.2018 for the balance amount. Thus part of the debt had been repaid, but default occurred towards principal and interest on different dates. As per the Petition, debt of ₹ 1,44,32,054.80 remains unpaid against both the ICDs. The Corporate Debtor has given an undertaking that it has made arrangements for paying the debt and only requires some more time to settle the debt. Also, the impact of the present financial distress caused by the global novel corona virus pandemic necessitating a nationwide lockdown, cannot be ignored. Modifications and suspension of various provisions of the Code have been initiated so that companies facing financial stress due to the pandemic can be supported rather than be pushed into CIRP, else in the present scenario they may end up in liquidation and lose value further, which is the not objective of the IBC or other enactments. Steps have also been taken to ensure availability of more funds in the hands of businesses so that they can cope with the present economic scenario and restart their business. The Corporate Debtor's plea that it be given some more time to repay the debt needs to be accepted, and the Respondent/Corporate Debtor be directed to settle the debt at the earliest in consultation with the Petitioner/Financial Creditor. The Ld. Counsel for the Petitioner has insisted that the Corporate Debtor may be directed to clear the debt within 10 days. However, considering the amount involved and the present economic scenario, it would be fair to allow the Corporate Debtor some more time. Petition is disposed of by directing the Respondent to repay the balance debt or the amount as settled with the Petitioner, within a period of 90 days, failing which the Petitioner would be at liberty to file a fresh petition before this Tribunal.

Summary

Issues:
1. Initiation of Corporate Insolvency Resolution Process under IBC, 2016.
2. Default in repayment of loan amount by the Corporate Debtor.
3. Financial distress due to the global pandemic and its impact on insolvency proceedings.

Issue 1: Initiation of Corporate Insolvency Resolution Process under IBC, 2016:
The judgment pertains to a petition filed by a Financial Creditor seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against a Corporate Debtor for a defaulted loan amount. The Petitioner claimed a sum of ?1,44,32,054.80, including interest, as on a specified date. The Petitioner provided details of the loan granted through Inter-Corporate Deposits (ICDs) and subsequent defaults in repayment by the Respondent. The Respondent acknowledged the debt but sought additional time for repayment, citing arrangements with major creditors and ongoing settlements with other creditors.

Issue 2: Default in repayment of loan amount by the Corporate Debtor:
The judgment highlighted that the Corporate Debtor admitted its liability to repay the debt but requested additional time for settlement. The records indicated partial repayment by the Debtor and defaults on different dates. The Corporate Debtor assured arrangements for debt repayment, mentioning due payments from State Electricity Distributors and financial support from a major creditor. The Tribunal acknowledged the admitted debt, defaults, and the Corporate Debtor's efforts to clear dues, emphasizing the importance of allowing time for settlement.

Issue 3: Financial distress due to the global pandemic and its impact on insolvency proceedings:
The judgment considered the broader economic context of the global pandemic and its implications on businesses facing financial stress. It referenced legislative changes increasing the minimum default threshold and modifications to insolvency provisions to support distressed companies. In light of the economic challenges, the Tribunal decided to grant the Corporate Debtor additional time for debt repayment, balancing the interests of all parties involved and aiming to avoid insolvency proceedings that could lead to liquidation and loss of value.

In conclusion, the Tribunal disposed of the petition by directing the Corporate Debtor to repay the balance debt or the settled amount within 90 days. The judgment emphasized the need to consider the economic circumstances and granted the Debtor additional time for repayment, reflecting a balanced approach in resolving the financial dispute while considering the broader economic impact of the global pandemic.