2017 (10) TMI 297 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Insolvency and Bankruptcy Code, 2016 - Held that - A perusal of the Application and its Annexures clearly show that the Application is complete in all respects. A perusal of the Table showing the amount disbursed and the payments made, and the documents executed by the Respondent Company clinchingly establish that Respondent committed default in repayment of money borrowed from Reliance Capital Limited on interest which debt was assigned to the Applicant Company by virtue of a demerger order in a Demerger Scheme. Therefore, the Applicant is a Financial Creditor and the amount due to the Applicant is a financial debt. The material on record clearly establish that the Respondent Company committed default in repayment of financial debt. The Applicant proposed the name of Shri Subodhkumar Bajranglal Kedia as Interim Resolution Professional and also filed his Written Communication. In view of the above discussions, the Application deserves to be admitted and it is accordingly admitted under sub-section 5(a) of Section 7 of the Code

Issues:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 for triggering Corporate Insolvency Resolution Process.
2. Assignment of debts due to demerger of Commercial Finance Division.
3. Default in repayment of loans by the Respondent.
4. Appointment of Interim Resolution Professional and initiation of Corporate Insolvency Resolution Process.
5. Order of moratorium under Section 13(1)(a) of the IB Code.

Analysis:

1. The Tribunal received an Application from Reliance Commercial Finance Ltd, as a Financial Creditor, under Section 7 of the Insolvency and Bankruptcy Code, 2016, against a Company identified as the 'Corporate Debtor'. The Application was based on the Respondent's default in repayment of loans, triggering the need for Corporate Insolvency Resolution Process.

2. Following the demerger of the Commercial Finance Division of Reliance Capital Limited into Reliance Commerce Finance Limited, all debts owed to Reliance Capital Ltd were assigned to Reliance Commercial Finance Ltd as per a demerger order. This assignment included various agreements executed by the Respondent in favor of Reliance Capital Ltd to support the loans.

3. The Respondent, a Company engaged in the business of buying and selling motorcycles, had taken loans from Reliance Capital Ltd, which were later assigned to Reliance Commercial Finance Ltd. Despite repeated demands and a legal notice, the Respondent failed to repay the outstanding amounts, indicating an inability to do so. The Tribunal found clear evidence of default in repayment by the Respondent.

4. The Tribunal admitted the Application under Section 7 of the Code, appointing an Interim Resolution Professional to oversee the Corporate Insolvency Resolution Process. The appointed professional was directed to make a public announcement, call for claims, and enforce a moratorium as per the relevant sections of the Code.

5. An order of moratorium was issued under Section 13(1)(a) of the IB Code, prohibiting various actions against the Corporate Debtor, including suits, asset transfers, and recovery proceedings. Exceptions were made for essential goods/services supply and transactions notified by the Central Government. The moratorium was to remain in force until the completion of the Corporate Insolvency Resolution Process, subject to specific provisions.

This detailed analysis outlines the legal judgment issued by the National Company Law Tribunal, Ahmedabad, regarding the initiation of Corporate Insolvency Resolution Process due to default in loan repayment by the Respondent Company, leading to the appointment of an Interim Resolution Professional and the enforcement of a moratorium under the Insolvency and Bankruptcy Code, 2016.

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