2020 (11) TMI 1019 - Tri - Insolvency and Bankruptcy

Maintainability of application - Initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - maintainability of simultaneous proceedings under SARFAESI Act and IBC - existence of debt and dispute or not - HELD THAT - The identical issue fell for consideration before the Hon ble NCLAT in the matter of RAKESH KUMAR GUPTA VERSUS MAHESH BANSAL 2020 (6) TMI 688 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI where it was held that The pendency of actions under the SARFAESI Act or actions under the Recovery of Debts Due to Banks and Financial Institutions Act 1993 does not create obstruction for filling an Application under Section 7 of Insolvency and Bankruptcy Code 2016 specially in view of Section 238 of IBC. Thus it is now trite that pendency of actions under the SARFAESI Act by the Financial Creditor is not a bar for filling an Application under Section 7 of IBC 2016 especially in view of Section 238 of IBC. Further the proceedings under IBC 2016 cannot be said to be a parallel proceedings since the Application under Section 7 of IBC 2016 is filed to bring about a Resolution for the Corporate Debtor on the other hand the proceedings under SARFAESI Act 2002 is for recovery of the amount which is due and payable to the Financial Creditor. Existence of debt and dispute or not - amount of default involved - HELD THAT - There is a debt and default on the part of the Corporate Debtor and the Corporate Debtor is unable to repay its dues to the Financial Creditor - It is also seen that the present Application has been filed before this Tribunal on 17.06.2020 and as such the Notification issued by the Central Government in this regard by increasing threshold limit from 1 Lakh to 1 Crore would not apply to the facts and circumstances of the present case as the amount claimed to be in default is already more than 1 Crore. It is also noted that the Central government by way of an amendment inserted in Section 10A of I B Code 2016 wherein the default in respect of the dues arising from the period 25.03.2020 till 25.09.2020 (now extended upto 25.12.2020) has been excluded and as such in the present case from Part-IV of the Application it is seen that the default has occurred much prior to 25.03.2020 and hence Section 10A of I B Code 2016 also would not come to the aid of the Corporate Debtor - this Application as filed by the Applicant-Financial Creditor is required to be admitted under Section 7 (5) of the I B Code 2016. Application admitted - moratorium declared.

Summary

Issues Involved:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Alleged default by the Corporate Debtor.
3. Proceedings under the SARFAESI Act, 2002.
4. Debt and default determination.
5. Appointment of Interim Resolution Professional (IRP).
6. Moratorium under Section 14 of IBC, 2016.

Issue-wise Detailed Analysis:

1. Application under Section 7 of IBC, 2016:

The application was filed by the Financial Creditor, a Limited Company, against the Corporate Debtor, a Private Limited Company. The Financial Creditor proposed Mr. A. Mohan Kumar as the Interim Resolution Professional (IRP).

2. Alleged Default by the Corporate Debtor:

The Financial Creditor claimed a sum of ?2,74,08,639/- against the Corporate Debtor, whose account was classified as Non-Performing Asset (NPA) on 31.10.2016. The Corporate Debtor contested the application, arguing that only ?2,00,00,000/- was disbursed out of the sanctioned ?3,78,00,000/- and that the Financial Creditor had already taken possession of the mortgaged property under the SARFAESI Act, 2002.

3. Proceedings under the SARFAESI Act, 2002:

The Corporate Debtor argued that the Financial Creditor had initiated recovery proceedings under the SARFAESI Act and taken possession of the property. They contended that this barred the Financial Creditor from initiating parallel proceedings under IBC, 2016. However, it was held that the pendency of actions under the SARFAESI Act does not obstruct filing an application under Section 7 of IBC, 2016, as per Section 238 of IBC.

4. Debt and Default Determination:

The Tribunal found that there was a debt and default on the part of the Corporate Debtor, which was unable to repay its dues. The Tribunal referenced judgments from the Hon’ble Supreme Court and NCLAT, which clarified that the existence of a financial debt and default in excess of ?1,00,000/- (now increased to ?1 Crore) mandates the admission of the application and initiation of the Corporate Insolvency Resolution Process (CIRP).

5. Appointment of Interim Resolution Professional (IRP):

The Financial Creditor proposed Mr. A. Mohan Kumar as the IRP, and his written communication was filed in the prescribed format. The Tribunal appointed him to take forward the CIRP, superseding the powers of the Board of Directors of the Corporate Debtor.

6. Moratorium under Section 14 of IBC, 2016:

Upon admission of the application, a moratorium was declared, prohibiting:
a. Institution or continuation of suits or proceedings against the Corporate Debtor.
b. Transfer or disposal of any assets of the Corporate Debtor.
c. Actions to enforce security interests.
d. Recovery of property by owners or lessors.

The moratorium ensures the supply of essential goods or services to the Corporate Debtor is not interrupted, except under specified circumstances. The moratorium will last until the completion of the CIRP or until an order for liquidation or approval of a resolution plan is passed.

Conclusion:

The application was admitted under Section 7(5) of IBC, 2016, and the moratorium came into effect. The IRP was directed to take necessary steps as per the statute and file a report within 20 days. The order was communicated to the Financial Creditor, Corporate Debtor, IBBI, and the Registrar of Companies.