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2019 (4) TMI 2087 - Tri - Insolvency and BankruptcyMaintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - disbursal of loan amount against the consideration for the time value of money - default of either in the payment of interest or in the payment of principal amount or both on the part of the CD - Section 7 of IBC, 2016 - HELD THAT - It is quite clear that a debt can be considered as a 'financial debt' if it is disbursed against the consideration for the time value of money. It is also required to be noticed that under the provisions of Section 7 of IBC, 2016 the FC is entitled to initiate the CIRP against the CD when a default has occurred on the part of CD in relation to the repayment of financial debt owed to FC. It is the averment of the petitioner in the instant case that a sum of Rs. 1,00,00,000/- has been disbursed as loan repayable on demand. However, it is the contention of the CD that the said loan amount of Rs. 1,00,00,000/- can be re-paid at the choice of CD within a period of 5 years and in this connection Annexure R-I annexed at page 11 of the typed set filed along with the reply is pointed out by the CD. Certain essential conditions are required to be satisfied by a Financial Creditor seeking to invoke the provisions of CIRP as against the CD before this Tribunal taking into consideration Section 5(7), Section 5(8) read with Section 7 of IBC, 2016 can take cognizance of it i) There must be disbursal of loan amount; ii) Such disbursal should be made for a consideration for time value of money; and iii) A default should have arisen either in the payment of interest or in the payment of principal amount or both on the part of the CD. The above conditions are to be cumulatively satisfied with by the FC before this Tribunal can admit the petition and as a consequence unfold the CIRP as against the CD. However, in the instant case even though disbursal of Rs. 1,00,00,000/- by the FC to the CD is not disputed. However, in relation to whether it is made available for consideration for time value of money as well as in relation to existence of default on the part of CD at the time of initiation of the petition proceedings is vehemently denied by the CD. The petitioner is thereby required to satisfy this Tribunal that all the above 3 conditions are cumulatively satisfied by furnishing documents to the said effect. However, FC has miserably failed in this respect but on the other hand the document annexed as R-l by the respondent demonstrates it is otherwise. There are no hesitation in dismissing this petition and further there are no hesitation in the absence of default on the part of the CD, in imposing a fine of Rs.1,00,000/- upon the FC for invoking the provisions of IBC, 2016 as against the CD under Section 75 of IBC, 2016 which amount shall be payable to the CD by FC within 10 days from the date of this order. Petition dismissed.
Issues:
1. Petition under Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor. 2. Disbursement of loan by Financial Creditor and repayment dispute. 3. Interpretation of 'Financial Debt' and 'Financial Creditor' under IBC, 2016. 4. Conditions for initiating CIRP against the Corporate Debtor. Issue 1: The petitioner, representing itself as the Financial Creditor, filed a petition seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The petitioner claimed that a loan of Rs. 1,00,00,000/- was disbursed to the Corporate Debtor, which was repayable on demand along with interest. The petitioner alleged default on the part of the Corporate Debtor and requested the Tribunal to unfold the CIRP. Issue 2: The dispute arose regarding the repayment of the loan amount between the Financial Creditor and the Corporate Debtor. The Financial Creditor contended that the loan was disbursed against the time value of money, making it a financial debt under the IBC, 2016. However, the Corporate Debtor argued that the loan was interest-free and repayable within 5 years based on an oral agreement, not on demand as claimed by the Financial Creditor. Issue 3: The Tribunal analyzed the definitions of 'Financial Debt' and 'Financial Creditor' under the IBC, 2016. It was highlighted that a debt qualifies as a financial debt if disbursed against the consideration for the time value of money. The Tribunal emphasized that a default must occur for a Financial Creditor to initiate CIRP against the Corporate Debtor. Issue 4: The Tribunal outlined essential conditions for a Financial Creditor to invoke the provisions of CIRP against the Corporate Debtor. These conditions included the disbursal of the loan amount, consideration for time value of money, and the existence of a default in payment. The Tribunal found that the Financial Creditor failed to satisfy these conditions and dismissed the petition. Additionally, a fine of Rs. 1,00,000/- was imposed on the Financial Creditor for initiating the proceedings with false information. This detailed analysis of the judgment highlights the key issues involved in the legal dispute and the Tribunal's decision based on the interpretation of relevant provisions under the Insolvency and Bankruptcy Code, 2016.
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