2021 (10) TMI 1352 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Financial Service Provider/Srei Infrastructure Finance Limited (SIFL) - SIFL has committed defaults of significant amount in relation to the financial debt availed by it from various financial creditors - Existence of Debt and dispute or not - time limitation - HELD THAT - The documents placed on records prima facie prove that there has been a default and that the sum involved in such default is in excess of the threshold limit of one crore rupees prescribed at present under section 4(1) of the Code. Moreover, since the sanction letters are in the year 2018 onwards and date of default from November 2021, the petition is not hit by limitation. This is a fit case for initiation proceedings under section 227 read with rule 5 of the Rules ibid, since the debt in question qualifies as financial debt under section 5(8) read with section 3(11) of the Code - The Petition made by the Reserve Bank of India is complete in all respects as required by law. It clearly shows that the Respondent/FSP is in default of a debt due and payable, and the default is more than the minimum amount as stipulated under section 4(1) of the Code. Therefore, the default stands established and there is no reason to deny the admission of the Petition. Petition admitted - moratorium declared.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process against a Financial Service Provider (FSP) under the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Jurisdiction and Application Filing:
The Reserve Bank of India (RBI) filed an application under section 227 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Srei Infrastructure Finance Limited (SIFL), a Financial Service Provider (FSP). The FSP is a company registered under the Companies Act, 1956, with jurisdiction falling under the Bench's purview.

2. Default and Supporting Documents:
RBI concluded that SIFL had significant defaults in financial debt repayment based on credit information. UCO Bank reported defaults amounting to a principal sum and interest, with documents supporting the default status as "SMA-2," indicating overdue payments. The RBI, through its notification, superseded SIFL's Board of Directors, appointing an Administrator and an Advisory Committee.

3. Legal Requisites and Debt Default Validation:
The application satisfied the requirements under section 7 of the Code, proving the existence of debt and default exceeding the prescribed limit. The Adjudicating Authority confirmed the default's validity, considering the documents provided and the absence of limitation issues.

4. Appointment of Administrator and CIRP Initiation:
Mr. Rajneesh Sharma was appointed as the Administrator, subject to filing unconditional consent. The Adjudicating Authority admitted the Petition, ordering a moratorium under section 14 of the Code, effective until CIRP completion or resolution plan approval. Public announcement and specific directives regarding the Administrator's functions and management during CIRP were outlined.

5. Compliance and Future Proceedings:
The Registry was instructed to communicate the Order promptly, with additional directions for updating the Registrar of Companies and progress reporting. A future date was set for filing the progress report, and the issuance of a certified copy was contingent upon compliance.

This comprehensive analysis highlights the legal proceedings and outcomes of the judgment, emphasizing the key aspects and decisions made by the Adjudicating Authority in the context of initiating CIRP against the Financial Service Provider.