2019 (3) TMI 1925 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Financial Debt or not - existence of debt and dispute or not - HELD THAT - In the present case applicant bank had sanctioned and disbursed the term loan amount recoverable with applicable interest by entering in to loan agreements with the corporate debtor. The corporate debtor had borrowed the credit facility against payment of interest as agreed between the parties. The loan was 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 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 facts it is seen that the applicant bank clearly comes within the definition of Financial Creditor. The material placed on record further confirms that applicant financial creditor had disbursed various loan facilities to the respondent corporate debtor and the respondent has availed the loan and committed default in repayment of the outstanding 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 - 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. Application admitted - moratorium declared.

Summary

Issues Involved:
1. Territorial Jurisdiction
2. Filing and Admissibility of Application
3. Default and Financial Debt
4. Appointment of Interim Resolution Professional (IRP)
5. Declaration of Moratorium
6. Duties of Interim Resolution Professional
7. Communication and Public Announcement

Issue-Wise Detailed Analysis:

1. Territorial Jurisdiction:
The Tribunal confirmed its territorial jurisdiction over the National Capital Territory (NCT) of Delhi as the registered office of the respondent corporate debtor is located in New Delhi. This jurisdiction is aligned with sub-section (1) of Section 60 of the Insolvency and Bankruptcy Code, 2016.

2. Filing and Admissibility of Application:
The application was filed by the State Bank of India (SBI) 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. The application was made in the requisite FORM-1 to initiate the Corporate Insolvency Resolution Process (CIRP) against the respondent corporate debtor. The Tribunal noted that the application was complete and there were no disciplinary proceedings pending against the proposed IRP.

3. Default and Financial Debt:
The applicant bank claimed a sum of ?142,95,99,869.65 along with interest due from the respondent company as of 31.08.2018. The Tribunal reviewed the evidence, including the statement of accounts, loan agreements, and security documents, and confirmed that the respondent had defaulted on multiple accounts. The Tribunal noted that the debt qualified as a "financial debt" under Section 5(8) of the Code, and the applicant bank was a "financial creditor" under Section 5(7).

4. Appointment of Interim Resolution Professional (IRP):
The applicant proposed Mr. Vivek Raheja as the IRP, who had agreed to the appointment and provided the necessary declarations, including that no disciplinary proceedings were pending against him. The Tribunal found that Mr. Raheja satisfied the requirements of Section 7(3)(b) of the Code and appointed him as the IRP.

5. Declaration of Moratorium:
The Tribunal declared a moratorium in terms of Section 14 of the Code, which included prohibitions on:
- Institution or continuation of suits or proceedings against the corporate debtor.
- Transferring, encumbering, or disposing of any assets of the corporate debtor.
- Actions to foreclose, recover, or enforce any security interest.
- Recovery of any property occupied by the corporate debtor.

The moratorium does not apply to transactions notified by the Central Government or the supply of essential goods or services to the corporate debtor.

6. Duties of Interim Resolution Professional:
The IRP was directed to perform functions under Sections 15, 17, 18, 19, 20, and 21 of the Code, including managing the day-to-day affairs of the corporate debtor and preserving the value of its property. All personnel connected with the corporate debtor were legally obligated to assist the IRP. The IRP could apply to the Tribunal for orders in case of any violations or illegal transactions by the ex-management.

7. Communication and Public Announcement:
The Tribunal directed that a public announcement be made by the IRP regarding the admission of the application within three days. The office was instructed to communicate the order to the financial creditor, the corporate debtor, the IRP, and the Registrar of Companies, NCT of Delhi & Haryana, within seven days. The Registrar was also directed to update its website to reflect the admission of the petition.

In conclusion, the Tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, and initiated the Corporate Insolvency Resolution Process against the respondent corporate debtor.