2018 (1) TMI 1247 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Held that - Petitioner herein is a Financial Creditor and a financial debt is owed by the Corporate Debtor as per the provisions of IBC, 2016, the Petition is to be admitted applying the ratio contained therein and the Insolvency process be initiated in relation to the Corporate Debtor in view of the default committed by the Corporate Debtor which is evident from the dishonour of cheques issued and accordingly the Petition stands admitted. Mr. Kanwal Chaudhary is appointed as the Interim Resolution Professional having his address at EA-413, Maya Enclave, New Delhi-110 064 to take over the affairs of the Corporate Debtor as envisaged under the provisions of IBC,2016 and who is duly bound to act in consonance with the provisions of IBC,2016 and other rules and regulations framed thereunder. The moratorium as envisaged under the provisions of Section 14 as extracted hereunder shall follow in relation to the Corporate Debtor and the same is to be declared.

Summary

Issues Involved:
1. Classification of the petitioner as a Financial Creditor.
2. Nature of the transaction between the petitioner and the corporate debtor.
3. Occurrence of default by the corporate debtor.
4. Maintainability of the petition under IBC, 2016.
5. Appointment of the Interim Resolution Professional (IRP).
6. Declaration of moratorium under Section 14 of IBC, 2016.

Issue-wise Detailed Analysis:

1. Classification of the Petitioner as a Financial Creditor:
The petitioner claimed to be a Financial Creditor under Section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC, 2016), seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor. The petitioner invested ?25,00,000 with the corporate debtor, which was assured of repayment, and provided a flat as collateral. The petitioner argued that the investment should be considered a financial debt as defined under Section 5(8) of IBC, 2016, citing the mutual agreement dated 10.04.2017 and the dishonoured post-dated cheques as evidence.

2. Nature of the Transaction:
The petitioner contended that the investment was made with an unconditional guarantee to buy back the flat at a pre-settled amount, thus qualifying as a financial debt. The corporate debtor, however, argued that the sum was an advance towards the purchase of immovable property and not an investment. The corporate debtor pointed to specific clauses in the agreement to support their argument that the relationship was that of a purchaser and seller.

3. Occurrence of Default:
The petitioner highlighted the dishonour of post-dated cheques as evidence of default. The corporate debtor countered that the time period for handing over possession of the flat extended until April 2019, and thus, no default could occur before that date. The tribunal found the issuance of cheques dated in 2017 inconsistent with the corporate debtor's claim that no default could occur until 2019.

4. Maintainability of the Petition:
The tribunal considered whether the petition was maintainable under IBC, 2016. The corporate debtor raised technical objections, including the completeness of the application and the qualifications of the proposed IRP. The tribunal, however, found that the petitioner had rectified the identified mistakes and that the petition was maintainable.

5. Appointment of the Interim Resolution Professional (IRP):
The petitioner proposed Mr. Kanwal Chaudhary as the IRP, who was registered with the Insolvency and Bankruptcy Board of India. The tribunal appointed Mr. Chaudhary as the IRP to take over the affairs of the corporate debtor, as per the provisions of IBC, 2016.

6. Declaration of Moratorium:
The tribunal declared a moratorium under Section 14 of IBC, 2016, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovery actions against the corporate debtor. The moratorium would remain effective until the completion of the corporate insolvency resolution process or until the tribunal approved a resolution plan or passed a liquidation order.

Conclusion:
The tribunal concluded that the petitioner was a Financial Creditor and that a financial debt was owed by the corporate debtor. The petition was admitted, and the insolvency resolution process was initiated against the corporate debtor due to the evident default. Mr. Kanwal Chaudhary was appointed as the IRP, and a moratorium was declared as per Section 14 of IBC, 2016. The management of the corporate debtor was suspended, and all parties were directed to cooperate with the IRP.