2018 (8) TMI 589 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Held that - In the case in hand the respondent company has committed default in repayment of the outstanding amount. Moreover, the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been a default in repayment of the financial debt. As a sequel to the above discussion and in terms of Section 7(5)(a) of the Code, the present application is admitted.

Summary

Issues Involved:
1. Jurisdiction and Admissibility
2. Financial Creditor's Claim and Evidence
3. Corporate Debtor's Defense and Objections
4. Appointment of Interim Resolution Professional (IRP)
5. Declaration of Moratorium

Issue-wise Detailed Analysis:

1. Jurisdiction and Admissibility:
The Tribunal established its territorial jurisdiction over the NCT of Delhi, as the registered office of the corporate debtor is located in New Delhi. The application was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, by M/s Asset and Reconstruction Company (India) Limited (ARCIL), seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s White Metals Limited. The Tribunal confirmed that the application was complete and satisfied the requirements of Section 7(3)(b) of the Code.

2. Financial Creditor's Claim and Evidence:
ARCIL, as the financial creditor, provided extensive evidence of the financial facilities extended to the corporate debtor, including term loans and cash credit facilities amounting to ?111.46 crores, which were later restructured and increased. The financial creditor also submitted the assignment agreement dated 17.04.2015, through which Indian Overseas Bank assigned the debt to ARCIL. The corporate debtor's account was declared a Non-Performing Asset (NPA) on 11.11.2011, with an outstanding amount of ?213,68,01,929 as of 30.06.2017. The financial creditor placed on record loan agreements, hypothecation agreements, mortgage deeds, and balance confirmation letters to substantiate the claim of default.

3. Corporate Debtor's Defense and Objections:
The corporate debtor argued that the application was an abuse of process, citing the company's status as a going concern with 200 workers. However, the Tribunal noted that the provisions of the Code are triggered upon a default of ?1 lakh or more. The debtor disputed the claim amount and the date of NPA, but the Tribunal found sufficient evidence of default, including acknowledgments of debt and the declaration of NPA upheld by the Debts Recovery Tribunal. The debtor's objections regarding the pendency of proceedings before the Debt Recovery Tribunal (DRT) and the necessity of consent from other consortium banks were dismissed, as Section 238 of the Code provides overriding effect, and the financial creditor had a valid assignment agreement.

4. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Shri Hemant Sharma as the Interim Resolution Professional (IRP), confirming that there were no disciplinary proceedings pending against him. The IRP was directed to make a public announcement regarding the admission of the application under Section 7 of the Code and to perform functions as per Sections 15, 17, 18, 19, 20, and 21 of the Code.

5. Declaration of Moratorium:
The Tribunal declared a moratorium as per Section 14 of the Code, prohibiting the institution or continuation of suits or proceedings against the corporate debtor, transferring or disposing of any assets, and actions to foreclose or enforce security interests. The moratorium does not apply to transactions notified by the Central Government or essential goods and services. The IRP was tasked with preserving the value of the corporate debtor's property and managing its affairs.

The Tribunal concluded the judgment by directing the office to communicate the order to the financial creditor, corporate debtor, and IRP within seven days.