2019 (9) TMI 1602 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor defaulted to make repayments of the loan in accordance with the terms of the Loan Agreement - Financial creditors - existence of debt and dispute or not - HELD THAT - On due perusal of the documents annexed, the Debt is to be qualified as Financial Debt as defined under section 5(8) of Insolvency Bankruptcy Code, 2016. As a result, the Financial Creditor has filed this Application for initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. Facts and circumstances have also established the Default on the part of the Debtor Company. Since this is a Petition of Financial Creditor , therefore, the Insolvency Process shall commence as prescribed under Section 7 of I BC, 2016. Application admitted - moratorium declared.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency & Bankruptcy Code, 2016 for default in loan repayment.

Analysis:
The Petitioner, a Financial Creditor, filed a petition under Section 7 of the Insolvency & Bankruptcy Code, 2016 against the Corporate Debtor for an outstanding debt amount of ?54,76,712, including the principal loan amount and accrued interest. The loan agreement between the parties stipulated repayment terms, with the first installment due on 31.12.2018. The Corporate Debtor defaulted on the payment, leading to the Financial Creditor sending default notices and eventually initiating insolvency proceedings.

The Tribunal examined the submissions and documents presented by the Petitioner, noting the lack of response or defense from the Respondent Debtor. It found that the debt qualified as "Financial Debt" under the Insolvency & Bankruptcy Code, 2016, and established the default on the part of the Debtor Company. Consequently, the Tribunal concluded that the initiation of Corporate Insolvency Resolution Process was warranted under Section 7 of the Code.

As per the Order, the Tribunal approved the appointment of the proposed Interim Resolution Professional (IRP) and directed the commencement of insolvency proceedings, including the declaration of moratorium as per Section 14 of the Code. The moratorium prohibited the institution of suits or parallel proceedings against the Debtor, ensuring the protection of assets during the resolution process. However, the supply of essential goods or services to the Corporate Debtor was allowed to continue uninterrupted during the moratorium period.

The Tribunal's decision to admit the petition marked the commencement of Corporate Insolvency Resolution Process from the date of the Order, with the appointed IRP tasked with overseeing the resolution process and reporting progress to the Tribunal within the specified timeline. The Order emphasized compliance with the Code's provisions and the effective management of the insolvency proceedings until resolution completion.