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2022 (3) TMI 1553 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor has defaulted on various payments due to the Applicant - bonafide intent for resolution or not - forum used as recovery mechanism - active participation in the resolution process of the Corporate Debtor in terms of the Prudential Framework before filing the CP and even thereafter - HELD THAT - Whether an application under section 7 of the Code is filed with bona fide intention for the resolution of the Corporate Debtor or for recovery of debt can be determined by examining the facts of the case. In the present case, the Petitioner had actively participated in the resolution process of the Corporate Debtor in terms of the Prudential Framework, along with all other Lenders before filing the CP and even thereafter. This conduct of the Petitioner puts a question on the bona fides of the instant Petition. The conduct of the Petitioner made to believe that it has been trying to utilise this forum as a 'recovery mechanism'. It is pertinent to take into consideration the financial position of the Respondent and the repercussions if the Respondent Company, a going concern, is admitted into CIRP more so when all other Lenders, who comprises the required majority percentage, in the event of constitution of the Committee of Creditors, seriously pursuing for the resolution of the Corporate Debtor under the Prudential Framework, with the active consent and participation of the Petitioner. In the present case, the Respondent is willing and trying to repay the debts of all the Creditors and to show its bona fides when it was ready to sell its vending business, and when other Lenders accepted the said move, but the Petitioner refused to cooperate in that process. This action of the Petitioner clearly establishes that its intention was recovery of its debt but not the resolution of the Corporate Debtor. Therefore, though, a Creditor can choose its own forum, but in the peculiar facts of the present case, we are of the view that the Petitioner is trying to utilise the provisions of the I B Code, 2016, for recovery of debt, which is impermissible. Petition dismissed.
Issues Involved:
1. Jurisdiction and maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Existence of debt and default by the Corporate Debtor. 3. Impact of RBI's Prudential Framework for Resolution of Stressed Assets on the petition. 4. Applicability of Section 10A of the Insolvency and Bankruptcy Code, 2016 due to the Covid-19 pandemic. 5. Allegation of the petition being filed for debt recovery rather than resolution. Issue-Wise Detailed Analysis: 1. Jurisdiction and Maintainability of the Petition: The petition was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by the Financial Creditor, Co-operative Rabobank U.A., to initiate Corporate Insolvency Resolution Process (CIRP) against Coffee Day Global Limited (Corporate Debtor). The Corporate Debtor is incorporated in Karnataka, thus giving jurisdiction to the Bengaluru Bench of the National Company Law Tribunal (NCLT). 2. Existence of Debt and Default by the Corporate Debtor: The Financial Creditor extended two facilities amounting to USD 4,50,00,000 to the Corporate Debtor through facility agreements dated 29.07.2015 and 27.03.2018. The Corporate Debtor defaulted on various payments due under these agreements since mid-2019. As of 06.01.2021, the total amount due was USD 1,49,42,788. The Financial Creditor provided several documents to prove the existence of debt and default, including board resolutions, facility agreements, computations of default amounts, security agreements, and personal guarantees. 3. Impact of RBI's Prudential Framework for Resolution of Stressed Assets: The Corporate Debtor argued that its lenders, including Yes Bank and others, initiated a debt resolution process under RBI's Prudential Framework for Resolution of Stressed Assets, which provides a mechanism for timely resolution of stressed assets. The lenders signed an Inter Creditor Agreement (ICA) and formed a Steering Committee to oversee the resolution process. Despite being aware of this ongoing process, the Financial Creditor filed the petition. 4. Applicability of Section 10A of the Insolvency and Bankruptcy Code, 2016: The Corporate Debtor contended that the petition was not maintainable under Section 10A of the Code, which suspends the filing of petitions for defaults occurring between 25.03.2020 and 24.03.2021 due to the Covid-19 pandemic. The Financial Creditor argued that the defaults occurred before the suspension period, and the petition was based on these pre-suspension defaults. The Tribunal noted that the Financial Creditor's claim included defaults that occurred before and during the suspension period. 5. Allegation of the Petition Being Filed for Debt Recovery: The Corporate Debtor alleged that the petition was filed for debt recovery rather than resolution, as the Financial Creditor participated in the resolution process under the Prudential Framework but later filed the petition. The Tribunal observed that the Financial Creditor's conduct raised questions about the bona fides of the petition, indicating it was using the forum as a recovery mechanism rather than for resolution. Conclusion: The Tribunal dismissed the petition, concluding that the Financial Creditor was attempting to use the provisions of the Insolvency and Bankruptcy Code, 2016, for debt recovery, which is impermissible. The Tribunal emphasized that the primary focus of the Code is the resolution and revival of the Corporate Debtor, not merely debt recovery. Consequently, the related I.A. No. 261 of 2021 was also disposed of as no further orders were necessary.
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