2017 (6) TMI 924 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process on request of the Financial Creditor - application not been properly served on the Corporate Debtor - Held that - Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules 2016 specifically directs that the applicant shall dispatch forthwith a copy of the application filed with the Adjudicating Authority by registered post or speed post to the registered office of the corporate debtor (Italics supplied). In the absence of any material or document to demonstrate that the registered office of the Corporate Debtor having been shifted from 1st Floor NBCC Tower 15 Bhikaji Cama Place New Delhi 110 066 to any other address particularly to the address as claimed to be registered office address by the Financial Creditor in the application we are constrained to hold that the application has not been properly served on the Corporate Debtor and that we consider basically explains the absence of the Corporate Debtor before us more so when according to the records produced by the Financial Creditor the Corporate Debtor seems to be defending its cause in the proceedings pending before DRT I Delhi as manifest vide order dated 01.03.2017 passed in O.A.218 of 2016. Also despite considerable opportunity being afforded to the Financial Creditor to rectify the defects in relation to service of proper notice of the application as required under IBC 2016 read with AAA Rules 2016 on the Corporate Debtor not done we are constrained to dismiss this Company Petition.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Financial Facilities and Loan Agreements
3. Default in Loan Repayment
4. Notices and Demand for Repayment
5. Procedural Compliance for Service of Notice

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP)
The petition was filed under the Insolvency & Bankruptcy Code (IBC), 2016, by a Financial Creditor, Indian Bank, seeking to initiate CIRP against the Corporate Debtor. The petition was supported by a Power of Attorney dated 30.6.2006.

2. Financial Facilities and Loan Agreements
The Corporate Debtor, incorporated in 2007, sought multiple credit facilities from the Financial Creditor to establish an electricity generation plant. The initial sanction letter dated 30.7.2010 approved a term loan of ?200 crores and non-fund-based facilities of ?100 crores. Due to non-fulfillment of pre-disbursement conditions, the validity of the sanction was extended on 1.2.2011. Subsequently, a revised sanction letter dated 6.6.2011 approved a term loan of ?269 crores, a short-term loan of ?200 crores, and non-fund-based facilities of ?100 crores. The Corporate Debtor executed the necessary documents, including a bridge loan agreement dated 17.6.2011, and utilized the sanctioned amount for project expenses.

3. Default in Loan Repayment
The Corporate Debtor failed to repay the short-term loan within the stipulated six months and sought extensions multiple times. Despite the Financial Creditor's cooperation and extensions, the Corporate Debtor's account was classified as a non-performing asset (NPA) on 31.5.2013. The Financial Creditor issued a letter on 21.5.2013 demanding repayment of ?207,51,07,223.34, which was acknowledged by the Corporate Debtor on 28.2.2014. Despite this acknowledgment, no payment was made, leading to a notice under Section 13(2) of the SARFAESI Act, 2002, and a loan recall notice dated 22.3.2016.

4. Notices and Demand for Repayment
The Financial Creditor issued multiple notices demanding repayment, including a notice under Section 13(2) of the SARFAESI Act, 2002, and a loan recall notice. The amount due, including interest, was ?320,40,38,089.52 as of 31.3.2017. The Financial Creditor also initiated proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, which are pending before DRT-I, New Delhi.

5. Procedural Compliance for Service of Notice
The Tribunal noted discrepancies in the service of notice to the Corporate Debtor. The address mentioned in the petition did not match the registered office address as per the documents. The application was not properly served on the Corporate Debtor, which explained its absence in the proceedings. The Tribunal emphasized the importance of complying with Rule 4(2) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, which mandates service to the registered office of the Corporate Debtor.

Conclusion:
The Tribunal dismissed the petition due to non-compliance with procedural requirements for serving notice to the Corporate Debtor. The dismissal was without prejudice to the Financial Creditor's rights to pursue the matter in other forums. The Tribunal's decision underscores the necessity of strict adherence to procedural rules in insolvency proceedings.