2018 (7) TMI 1740 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Initiation of corporate insolvency resolution process by financial creditor - Held that - As evident from the perusal of documents Annexure R(l)(Colly) & Annexure R(2) filed by the Financial Creditor along with the rejoinder that the shareholders of the Respondent Company are also the members of the Association, and thus fall under the same management. It is further obvious that the affairs of the Association being managed by the persons who are holding key managerial position and 99.83% of the shareholding in the Respondent Company. As further seen that Mr. Joginder Singh is the Director and Joint Secretary in the Respondent Company and Association respectively, who has executed and signed each of the documents including loan agreement as well which were required for the purpose of granting loan. Moreover, it does not lie in the mouth of the respondent to raise such an argument once respondent itself is in default. Therefore, admission of the petition cannot be successfully resisted on such a flimsy ground. Thus, we have no hesitation to reject the argument raised on behalf of the Corporate Debtor. Another argument that the petitioner has failed to adhere to the provisions of the Bankers Book Evidence Act, 1891 while submitting the Statement of Accounts, which is a mandatory provision as per the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 has also lost its sheen because vide Diary No. 669, dated 07.02.2018 an additional affidavit has been filed by Mr. Puneet Gogia along with a certificate in accordance with the Banker s Books Evidence Act, 1891 Annexure-B (Colly) . The filing of the aforesaid certificate completely answers the said objection The office is directed to communicate a copy of the order to the Financial Creditor, the Corporate Debtor and the Interim Resolution Professional at the earliest but not later than three days from today

Issues Involved:
1. Validity of the debtor-creditor relationship.
2. Authorization of the representative to file the petition.
3. Adherence to the Bankers Book Evidence Act, 1891.
4. Legal status change of the petitioner from NBFC to Bank.
5. Validity of loan agreement documents.
6. Disbursement of loan amount to an entity other than the respondent.
7. Compliance with Section 7 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Validity of the Debtor-Creditor Relationship:
The Corporate Debtor argued that the loan amount was disbursed to an Education Society, not directly to them, thus disputing the debtor-creditor relationship. However, the Tribunal found that the Corporate Debtor was indeed a co-borrower and had created a charge on the property as per Form No. CHG-1. The loan agreement was signed by the Corporate Debtor's director, establishing their liability.

2. Authorization of the Representative to File the Petition:
The Corporate Debtor questioned the validity of the authorization provided to the representative of the Financial Creditor. The Tribunal examined the Letter of Authority and concluded that Mr. Puneet Gogia was duly authorized to institute and prosecute legal proceedings, including filing the petition under the Insolvency and Bankruptcy Code, 2016.

3. Adherence to the Bankers Book Evidence Act, 1891:
The Corporate Debtor contended that the petitioner failed to comply with the Bankers Book Evidence Act, 1891 while submitting the Statement of Accounts. The Tribunal noted that an additional affidavit with a certificate in accordance with the Act was filed, thereby addressing this objection. The Tribunal deemed the objection frivolous and devoid of merit.

4. Legal Status Change of the Petitioner from NBFC to Bank:
The Corporate Debtor challenged the petitioner's legal status change from AU Financiers Private Limited to AU Small Finance Bank Limited. The Tribunal found that the petitioner had provided sufficient documentation to substantiate the change, including statements of accounts and a certificate under the Bankers Book Evidence Act, 1891.

5. Validity of Loan Agreement Documents:
The Corporate Debtor argued that the loan agreement was illegal as it was not signed by both parties, lacked a date, witness attestation, and the petitioner's seal. The Tribunal dismissed this argument, stating that the agreement was supported by CIBIL account statements and a certificate issued under the Bankers Book Evidence Act. The Tribunal found no denial concerning the disbursement of the loan or default in its repayment.

6. Disbursement of Loan Amount to an Entity Other than the Respondent:
The Corporate Debtor claimed that the loan was disbursed to an Education Society, not to them. The Tribunal found that the loan application was sent on the letterhead of the Corporate Debtor and signed by their director. Additionally, the Corporate Debtor had created a charge on the property, confirming their involvement in the loan agreement.

7. Compliance with Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal examined the provisions of Section 7(2) and Section 7(5) of the Insolvency and Bankruptcy Code, 2016. It concluded that the application was filed in the prescribed form and manner, a default had occurred, and no disciplinary proceedings were pending against the proposed Interim Resolution Professional. Therefore, the application warranted admission.

Conclusion:
The Tribunal admitted the petition, appointed Mr. Abhishek Anand as the Interim Resolution Professional, and declared a moratorium in terms of Section 14 of the Code. The Tribunal directed the Interim Resolution Professional to make a public announcement and perform his functions as per the Code. The Tribunal rejected all objections raised by the Corporate Debtor and directed the office to communicate the order to all relevant parties within three days.

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