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2019 (1) TMI 631 - Tri - Insolvency and BankruptcyInitiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - default in making repayment of loan - admission of application under Insolvency and Bankruptcy Code, 2016 - Held that - In this case the existence of debt and default is reasonably evidenced in the documents supporting the petition as well as from the statement of the ld. Counsel for the Corporate Debtor of not having any objection if the petition is admitted. Further the Petition under section 7 is complete. The Petitioner having named the Interim Resolution Professional with his consent, and there being no disciplinary proceedings against the same. We are of the view that the present case is fit for admission under the Insolvency and Bankruptcy Code, 2016. This petition filed under Section 7 of IBC, 2016, against the corporate debtor for initiating corporate insolvency resolution process against the corporate debtor is admitted and the moratorium with consequential directions declared.
Issues Involved:
1. Default in repayment by the Corporate Debtor. 2. Maintainability of the insolvency application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) post winding-up order. 3. Evidence of default. 4. Appointment of Interim Resolution Professional (IRP). 5. Declaration of moratorium. Detailed Analysis: 1. Default in Repayment by the Corporate Debtor: The petition was filed under Section 7 of the IBC by the Financial Creditor against the Corporate Debtor for initiating the Corporate Insolvency Resolution Process (CIRP) due to a default in repayment amounting to ?2,16,67,77,458.86 as of 31.03.2018. The Financial Creditor had extended various loan facilities to the Corporate Debtor, which were reviewed and restructured through a Restructuring Sanction Letter (RSL) dated 27.03.2015 and a Common Debt Restructuring Agreement (CDRA) dated 30.03.2015. The default amounts under different facilities were detailed, including Term Loan, Funded Interest Term Loan, Cash Credit, Letter of Credit, and Bank Guarantee. 2. Maintainability of Insolvency Application Post Winding-Up Order: The Corporate Debtor raised an objection based on a previous order by the Bombay High Court appointing a provisional liquidator. The Financial Creditor countered this by citing several judgments, including the NCLAT's decision in Indiabulls Housing Finance Ltd. vs Shree Ram Urban Infrastructure Ltd, which held that an application under Section 7 of the IBC is not maintainable once a winding-up order is passed. However, the Bombay High Court in Jotun India Pvt Ltd vs PSL and subsequent judgments held that the IBC provisions prevail over the Companies Act, 1956, and an insolvency application can be admitted even after a winding-up order. 3. Evidence of Default: The Financial Creditor provided substantial evidence of default, including recall notices, records from the Central Repository of Information on Large Credits (CRILC), credit information from Trans Union CIBIL Limited, entries in bankers' books, and standalone financial statements of the Corporate Debtor. These documents collectively demonstrated the existence of financial debt and the default by the Corporate Debtor. 4. Appointment of Interim Resolution Professional (IRP): The Financial Creditor proposed Mr. K. G. Somani as the IRP, confirming that there were no disciplinary proceedings against him. The tribunal accepted this proposal, appointing Mr. Somani to carry out the functions under the IBC. 5. Declaration of Moratorium: Upon admitting the petition, the tribunal declared a moratorium prohibiting: a. Institution or continuation of suits or proceedings against the Corporate Debtor. b. Transfer, encumbrance, alienation, or disposal of any assets by the Corporate Debtor. c. Actions to foreclose, recover, or enforce any security interest. d. Recovery of property occupied by the Corporate Debtor. The moratorium would be effective from 11.12.2018 until the completion of the CIRP or the approval of a resolution plan or liquidation order. Conclusion: The tribunal admitted the petition under Section 7 of the IBC, initiating the CIRP against the Corporate Debtor and declaring a moratorium. The IRP was appointed, and the Financial Creditor's evidence of default was deemed sufficient. The tribunal's decision was in line with the prevailing legal interpretations favoring the applicability of the IBC over the Companies Act in cases of insolvency resolution, even post a winding-up order.
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