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2019 (9) TMI 1690 - Tri - Insolvency and BankruptcyMaintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - The objection on the maintainability of Section 7 application cannot sustain, as the order of admission or the order of appointment of liquidator will not create any bar on the applicability of the provisions of IBC to the proceedings instituted under the Code. Till the company is ordered to be wound up i.e. the final dissolution order is passed; Adjudicating Authority can entertain a petition filed under the Code. In the present case respondent company has acknowledged receipt of Rs. 91,54,819/- disbursed through four RTGS transactions during July 2011. Besides MoU and buyer's agreements were executed between the parties in the year 2011. The applicant was allotted Unit No. 306 307 with super area of 3500 sq. ft. at 'Gateway Tower'. The applicant therefore comes within the definition of home buyer. Besides as per the agreement the respondent was liable to pay assured return. The loan was disbursed against the consideration for time value of money with a clear commercial effect of borrowing - Respondent has defaulted in paying the assured returns nor has handed over the possession of the units to the applicant. Moreover, the winding up order passed against the respondent company itself, is a record of default by the respondent corporate debtor. As per the Explanation to sub-section (1) of Section 7 the default can be to any financial creditor to the entity and not restricted to the creditor who triggers the insolvency resolution process. It is thus seen that the applicant 'financial creditor' has placed on record sufficient evidence in support of the claim as well as to prove the default. The spirit of the Code encourages resolution as against liquidation. Resolution is the rule; whereas liquidation is to be an exception. The object of the Code is to promote resolution over liquidation. Until option of resolution is exhausted, liquidation ought not to follow and therefore every effort must be made to try and see that resolution is made possible. Liquidation can only be allowed upon failure of resolution process - the petitioner being a financial creditor can invoke Corporate Insolvency Resolution Process under Section 7 of the Code against the respondent corporate debtor (in liquidation) as default in repayment of the financial debt is established. The present application under Section 7 of the Code for initiative Corporate Resolution Insolvency Process has been filed by petitioner financial creditors in Form-1 in terms of Rule 4 of Insolvency and Bankruptcy (application to Adjudicating Authority) Rules, 2016 accompanied with required information, documents and records as prescribed under the Rules. Petition admitted - moratorium declared.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Validity of the Memorandum of Understanding (MoU) and Buyer’s Agreement. 3. Admissibility of the Section 7 application amidst pending winding-up proceedings. 4. Compliance with procedural requirements for admitting the Section 7 application. 5. Appointment and responsibilities of the Interim Resolution Professional (IRP). 6. Declaration of moratorium and its implications. Issue-wise Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016: The applicant, a financial creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of CIRP against the respondent, a corporate debtor. The financial creditor had invested Rs. 91,54,819/- in the respondent’s project, "ABW Gateway Tower," and was entitled to assured monthly returns. The respondent defaulted on these payments since December 2014, leading to the initiation of CIRP. 2. Validity of the Memorandum of Understanding (MoU) and Buyer’s Agreement: The financial creditor and the corporate debtor signed a MoU on July 12, 2011, and a Buyer’s Agreement on July 18, 2011, for the investment and assured returns. The corporate debtor acknowledged the receipt of the investment amount and issued a provisional allotment letter. Despite these agreements, the corporate debtor failed to pay the assured returns and complete the project, leading to the financial creditor's demand for repayment. 3. Admissibility of the Section 7 application amidst pending winding-up proceedings: The corporate debtor was ordered to be wound up by the Hon’ble High Court of Delhi, and an Official Liquidator was appointed. However, the Hon’ble Supreme Court in Jaipur Metals and Electricals Employees Organization vs. Jaipur Metals and Electricals Ltd. and Forech India Ltd. v. Edelewiss Assets Reconstruction Co. Ltd. clarified that a Section 7 application under the Code is an independent proceeding and can proceed despite pending winding-up proceedings. Thus, the pendency of the winding-up petition did not bar the initiation of CIRP under Section 7. 4. Compliance with procedural requirements for admitting the Section 7 application: The Tribunal found that the application was complete, and the financial creditor had provided sufficient evidence of default. The financial debt exceeded the threshold limit of Rs. 1 lakh, and there were no disciplinary proceedings against the proposed IRP. Hence, the application met all the requirements under Section 7(5)(a) of the Code for admission. 5. Appointment and responsibilities of the Interim Resolution Professional (IRP): Mr. Anand Chandra Swain was appointed as the IRP. He fulfilled all the necessary criteria, including the absence of disciplinary proceedings against him. The financial creditor was directed to deposit Rs. 2 lakhs with the IRP to cover expenses. The IRP was tasked with making a public announcement and managing the corporate debtor’s affairs as per the Code’s provisions. 6. Declaration of moratorium and its implications: A moratorium was declared under Section 14 of the Code, prohibiting: - Institution or continuation of suits or proceedings against the corporate debtor. - Transfer, encumbrance, or disposal of the corporate debtor’s assets. - Foreclosure or enforcement of any security interest. - Recovery of property occupied by the corporate debtor. The moratorium aimed to protect the corporate debtor’s assets and ensure a smooth resolution process. In conclusion, the Tribunal admitted the application under Section 7, appointed the IRP, declared a moratorium, and directed the necessary procedural steps to initiate the CIRP against the corporate debtor.
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