2018 (7) TMI 968 - AT - Insolvency and Bankruptcy

Corporate insolvency process - Repayment of Restructured Liability - Held that - Admittedly, the Corporate Debtor failed to pay instalments in terms of the schedule I annexed to the agreement . What is the reason for default of payment cannot be a ground to reject the application under Section 7, as the Adjudicating Authority is only supposed to see whether the application is complete or not and whether there is any debt or default . We find no merit in this appeal.

Summary

Issues:
- Appeal against order admitting application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
- Dispute over 'debt' and 'default' in a Restructured Agreement.
- Failure to pay instalments leading to application rejection under Section 7.

Analysis:
The judgment involves an appeal against an order passed by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016, admitting an application by a Financial Creditor against a Corporate Debtor. The Appellant, a shareholder of the Corporate Debtor, contested the admission of the application on the grounds that there was a 'debt' but no 'default'. The Appellant referred to a Restructured Agreement between the Financial Creditor and the Corporate Debtor, highlighting the terms of repayment of the 'Restructured Liability'. The Appellant argued that the Corporate Debtor had sold properties as per the agreement, but payments were delayed due to an injunction obtained by the respondent.

The Respondent, representing the Financial Creditor, countered the Appellant's argument by stating that the amount had not been paid even as per the restructuring agreement, leading to a default in payment of instalments by the Corporate Debtor. The Tribunal carefully examined the contentions of both parties and reviewed the record, specifically focusing on the clauses related to the 'Repayment of Restructured Liability' in the Restructured Agreement dated October 20, 2014. The agreement outlined the repayment schedule, interest rates, and the sale of hospital property for repayment purposes.

The Tribunal noted that the Corporate Debtor had indeed failed to make payments as per the agreed schedule, leading to a default in payment of instalments. The Tribunal clarified that the reason for the default could not be a ground to reject the application under Section 7 of the Insolvency and Bankruptcy Code. The Adjudicating Authority's role was limited to determining the completeness of the application and the existence of 'debt' or 'default'. Consequently, the Tribunal dismissed the appeal, finding no merit in the arguments presented by the Appellant. The judgment concluded by stating that the appeal was dismissed with no costs awarded.