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2019 (3) TMI 192 - Tri - Insolvency and BankruptcyCorporate Insolvency Resolution Process - HELD THAT - The documentary evidence placed on the case file is sufficient in order to ascertain the existence of a default on the part of the Corporate Debtor. Therefore, in the light of the facts and circumstances and the legal position stated above, the Financial Creditors have fulfilled all the requirements of law, for admission of the Application filed under Section 7 of the I B Code, 2016 and has proposed the name of the IRP after seeking his consent in Form-2. Therefore, the Application stands admitted. The commencement of the Corporate Insolvency Resolution Process is ordered, which ordinarily shall get completed within 180 days, reckoning from the day this order is passed. Mr. Kannan Sambasivam, is hereby appointed as IRP as has been proposed by the Financial Creditor. There is no disciplinary proceeding pending against the IRP as reflects from Form-2. The IRP is directed to take charge of the Respondent Corporate Debtor's management immediately. He is also directed to cause public announcement as prescribed under Section 15 of I B Code, 2016, within three days from the date the copy of this order is received, and call for submissions of claim in the manner as prescribed. The moratorium is hereby declared which shall have effect from the date of this Order till the completion of Corporate Insolvency Resolution Process, for the purposes referred to in Section 14 of the I B Code, 2016.
Issues Involved:
1. Whether the Financial Creditors qualify as Financial Creditors under Sections 5(7) and 5(8) of the Insolvency and Bankruptcy Code, 2016. 2. Whether the Financial Creditors have a valid claim against the Corporate Debtor. 3. Whether the Corporate Insolvency Resolution Process (CIRP) should be initiated against the Corporate Debtor. Detailed Analysis: Issue 1: Qualification as Financial Creditors The Financial Creditors, Mrs. Anita Kumaran and Mr. K. Kumaran, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, M/s. KGS Developers Limited. The Financial Creditors claimed an outstanding amount of ?20,21,10,959/- against the Corporate Debtor, which included the principal and interest. The Corporate Debtor contested the Financial Creditors' status, arguing that as shareholders and directors/promoters, they could not be considered Financial Creditors under Sections 5(7) and 5(8) of the I&B Code, 2016. However, the Tribunal rejected this argument, noting that the Financial Creditors had provided collateral security (by way of mortgage) to ICICI Bank, enabling the Corporate Debtor to avail of a loan. The Tribunal emphasized that the loan carried the element of time value of money, and the Financial Creditors had repaid this loan on behalf of the Corporate Debtor. Therefore, they qualified as Financial Creditors. Issue 2: Validity of the Claim The Financial Creditors presented evidence of an agreement dated 07.02.2016, which outlined the terms of asset and liability division among the parties. The agreement included clauses that required the Corporate Debtor to release certain properties from ICICI Bank by a specified date, which the Corporate Debtor failed to do. Consequently, ICICI Bank initiated SARFAESI proceedings, and the Financial Creditors paid ?19 Crores to ICICI Bank to settle the debt. The Corporate Debtor argued that the 1st Applicant/Financial Creditor was not a signatory to the agreement and that there were other disputes involving the development of the property. However, the Tribunal found that the Financial Creditors had a valid claim based on the breach of the agreement and the payments made to ICICI Bank. The Tribunal also noted that the 2nd Applicant/Financial Creditor had resigned from the Corporate Debtor, further supporting their claim. Issue 3: Initiation of CIRP The Tribunal examined the documentary evidence and found sufficient grounds to ascertain the existence of a default by the Corporate Debtor. The Tribunal held that the Financial Creditors had fulfilled all legal requirements for the admission of the application under Section 7 of the I&B Code, 2016. Therefore, the Tribunal ordered the commencement of the CIRP, which is to be completed within 180 days from the date of the order. The Tribunal appointed Mr. Kannan Sambasivam as the Interim Resolution Professional (IRP) and declared a moratorium, prohibiting actions against the Corporate Debtor's assets and legal proceedings. The IRP was directed to take charge of the Corporate Debtor's management and make a public announcement to call for claims. Conclusion The Tribunal admitted the application filed by the Financial Creditors under Section 7 of the I&B Code, 2016, and initiated the Corporate Insolvency Resolution Process against the Corporate Debtor. The Tribunal appointed an IRP and declared a moratorium, ensuring the protection of the Corporate Debtor's assets and the continuation of essential services during the moratorium period. The Tribunal's decision was based on the fulfillment of legal requirements and the existence of a default by the Corporate Debtor.
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