2020 (6) TMI 784 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - corporate term loans to the CD and CD has failed to pay instalments - Financial Creditors - existence of debt and dispute or not - HELD THAT - The FC had extended corporate term loans to the CD and CD has failed to pay instalments, overdue amount and the principal amount as stated. FC also submitted Commercial Credit Information Report dated October 11, 2019 as record of default. Mere denial of the claim of the FC without any supporting evidence such as regular repayment of instalments, overdue amount, principal loan amount, etc., will not satisfy the submission of the managing director of the CD. Also, mere dialogues going on between the parties cannot amount to no default as claimed by the managing director in his reply - Petition filed under section 241 of the Companies Act will not have any bearing for the current proceedings initiated under the IBC. The application made by the financial creditor is complete in all respects as required by law. It clearly shows that the corporate debtor is in default of a debt due and payable, and the default is in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the IBC at the relevant time. Therefore, the default stands established and there is no reason to deny the admission of the petition. Application admitted - moratorium declared.

Summary

Issues:
Company petition under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by a financial creditor seeking to initiate the corporate insolvency resolution process against a corporate debtor.

Analysis:
The Tribunal had jurisdiction to deal with the petition as the corporate debtor was a private company limited by shares incorporated under the Companies Act, 1956. The financial creditor filed the petition on the grounds of non-payment of a substantial sum by the corporate debtor. The financial creditor had extended two term loans to the corporate debtor, creating security through indentures of mortgage. The mortgaged security's value was significant, and various documents were submitted as evidence. Despite repeated requests for payment, the corporate debtor failed to fulfill its obligations, leading to the financial creditor seeking initiation of the insolvency resolution process.

The managing director of the corporate debtor filed a reply denying the debt and claiming ongoing dialogues between the parties. However, the Tribunal found that mere denials without evidence of repayment did not negate the default. The Tribunal referred to a relevant judgment regarding the authority to initiate IBC proceedings and dismissed arguments related to a separate petition under the Companies Act. Acknowledgments of debt by the promoters and directors further supported the financial creditor's claims.

After reviewing the records, the Tribunal found the financial creditor's application complete and established the corporate debtor's default. Consequently, the Tribunal admitted the petition and ordered the initiation of the corporate insolvency resolution process. An interim resolution professional was appointed, and a moratorium was declared on various actions against the corporate debtor. The management vested with the resolution professional during the process, with obligations for reporting and depositing funds for expenses. The order was communicated to relevant parties, and compliance measures were outlined for the Registrar of Companies.

In conclusion, the Tribunal's detailed analysis of the issues presented in the petition led to the admission of the petition and the commencement of the insolvency resolution process against the corporate debtor. The legal proceedings and orders issued aimed to facilitate the resolution of the financial creditor's claims and manage the corporate debtor's insolvency in compliance with the Insolvency and Bankruptcy Code.