2019 (2) TMI 1972 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - The Counsel for the Financial Creditor in reply to the submissions made by the Corporate Debtor has submitted that sufficient opportunity has been provided by the Financial Creditor to the Corporate Debtor by way of restructuring vide agreements dated 03.06.2015 and 19.08.2016, but the Corporate Debtor has not been in a position to make compliance with the terms and conditions of the restructuring of the outstanding debt and there is no hope for any progress from the side of the Corporate Debtor in making payments of the outstanding debt, and there is default on the part of the Corporate Debtor. The submissions made by the Counsel for the Financial Creditor appear to be plausible, as sufficient opportunity has been given to the Corporate Debtor for making payment of the outstanding debt but it failed to do so. Although, some plausible explanations have also been given, by the Counsel for the Corporate Debtor for non-compliance of the agreements, yet the same are not sufficient to reject the Application of the Financial Creditor. The documentary evidence which is placed on the case file is sufficient in order to ascertain the existence of a default on the part of the Corporate Debtor. The Financial Creditor has fulfilled all the requirements of law including the name proposed for appointment as the IRP for admission of the Application filed under Section 7 of the I B Code, 2016. Hence, the Application stands admitted - moratorium declared.

Summary

Issues:
Admission of insolvency application under Section 7 of I&B Code against Corporate Debtor, non-compliance with terms of settlement agreement, default in payment by Corporate Debtor, appointment of Interim Resolution Professional, declaration of moratorium.

Analysis:
The Financial Creditor filed an application under Section 7 of the Insolvency and Bankruptcy Code against the Corporate Debtor seeking admission for Corporate Insolvency Resolution Process. The Financial Creditor claimed a specific amount including principal and interest. The Corporate Debtor, engaged in textiles business, had availed credit facilities from UCO Bank and hypothecated various assets as security. Despite entering into a settlement agreement with the Financial Creditor, the Corporate Debtor failed to make payments as per the agreed terms. The Corporate Debtor cited external hindrances for non-compliance and sought permission to sell assets to repay the debt.

The Financial Creditor contended that despite restructuring agreements, the Corporate Debtor failed to comply with payment terms, indicating no progress in debt repayment. The Tribunal found the Financial Creditor's submissions reasonable, noting the Corporate Debtor's default in payment. The Tribunal observed that although explanations were provided for non-compliance, they were insufficient to reject the Financial Creditor's application. Consequently, the Tribunal ordered the initiation of Corporate Insolvency Resolution Process, appointing an Interim Resolution Professional and declaring a moratorium on certain actions against the Corporate Debtor.

The Tribunal appointed an Interim Resolution Professional and directed compliance with statutory provisions. The Directors and associated parties were instructed to cooperate with the Interim Resolution Professional. The moratorium was declared to protect the Corporate Debtor's assets during the resolution process. Essential services to the Corporate Debtor were to continue uninterrupted. The Financial Creditor and Registry were directed to notify the Interim Resolution Professional promptly. The Order was pronounced in the presence of the parties' Counsel.

This detailed analysis covers the issues of admission of insolvency application, non-compliance with settlement terms, default in payment, appointment of Interim Resolution Professional, and declaration of moratorium as addressed in the Tribunal's judgment.