2019 (10) TMI 1513 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of ts dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - The Corporate Debtor is not in a position to revive the operations successfully or make any tangible proposal to pay off the debt due to the Financial Creditor, this Tribunal hereby admit this Company Petition. Application admitted - Moratorium declared.

Summary

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

Analysis:
The Financial Creditor filed a Company Petition before the National Company Law Tribunal under Section 7 of the Code, citing default by the Corporate Debtor in repaying a loan amount. The Corporate Debtor had defaulted on an amount of 13,71,05,776.34/- as of 31.12.2018, leading to the initiation of Corporate Insolvency Resolution Process (CIRP) by the Financial Creditor.

Continuation of Default and SARFAESI Proceedings:
Despite attempts by the Corporate Debtor to settle the outstanding debt through a One Time Settlement, no fruitful outcome was achieved. The Financial Creditor had previously initiated proceedings under Section 13(2) of the SARFAESI Act for debt recovery, which proved unsuccessful. Subsequently, the Financial Creditor resorted to initiating CIRP under Section 7 of the IBC, 2016.

Loan Structure and Defaults:
The Corporate Debtor, M/s. Cauvery Power Generation Private Limited, had approached various nationalized banks for a term loan totaling 184 Crores, with Punjab National Bank being one of the lenders. Despite offering securities and guarantees, the Corporate Debtor faced financial difficulties due to various factors such as increased coal prices and declining power prices, leading to a significant decline in profits for the financial year 2017.

Admission of Company Petition:
After hearing both parties and assessing the inability of the Corporate Debtor to revive operations or propose a concrete debt repayment plan, the Tribunal admitted the Company Petition. An Interim Resolution Professional (IRP) was appointed to oversee the CIRP process, and a moratorium was declared to protect the assets and interests of the Corporate Debtor during the resolution process.

Moratorium and Resolution Process:
The Tribunal declared a moratorium prohibiting certain actions against the Corporate Debtor, ensuring the supply of essential goods and services, and specifying the duration of the moratorium until the completion of the CIRP or liquidation approval. The public announcement of the Corporate Insolvency Resolution Process was mandated, and the appointed IRP was tasked with carrying out necessary functions in compliance with IBBI regulations.

Conclusion:
The Tribunal's decision to admit the Company Petition, appoint an IRP, and declare a moratorium signifies the initiation of the Corporate Insolvency Resolution Process due to the Corporate Debtor's default in loan repayment, highlighting the legal proceedings and protective measures under the Insolvency & Bankruptcy Code, 2016.