2019 (3) TMI 1336 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Corporate Debtor committed default to the extent under Section 7 of Insolvency and Bankruptcy Code, 2016 - HELD THAT - Investment Manager at his sole discretion is entitled to declare that the whole of debenture outstanding become due and payable immediately and accordingly recalled the entire debentures dues including interest and the same is in order. Accordingly the entire outstanding becomes due and since no payment was made, the Corporate Debtor committed default in repayment of the dues in respect of the debentures. Further during the hearing on 19.11.2018 the Managing Director of the Corporate Debtor was also present and submitted that he accepts the liability and default but requested time to settle the dues to the Petitioner by selling his private properties, but that has not materialized. This Adjudicating Authority, on perusal of the documents filed by the Creditor, is of the view that the Corporate Debtor defaulted in repaying the loan availed and also placed the name of the Insolvency Resolution Professional to act as Interim Resolution Professional and there being no disciplinary proceedings pending against the proposed resolution professional, therefore the Application under sub-section (2) of Section 7 is taken as complete, accordingly this Bench hereby admits this Petition

Summary

Issues:
1. Corporate Insolvency Resolution Process sought on the ground of default.
2. Petitioners investing in Non Convertible Debentures.
3. Existence of debt and default confirmed.
4. Legal notices issued regarding default in payment.
5. Invocation of consequences of an event of default.
6. Appointment of Interim Resolution Professional.

Issue 1: Corporate Insolvency Resolution Process sought on the ground of default.
The petition was filed seeking Corporate Insolvency Resolution Process of a Corporate Debtor due to default committed on a specific date under Section 7 of the Insolvency and Bankruptcy Code, 2016. The petitioners, including a trust and a debenture trustee, alleged a default of a substantial amount by the Corporate Debtor, leading to the initiation of insolvency proceedings.

Issue 2: Petitioners investing in Non Convertible Debentures.
The first petitioner, a trust, had invested in the Non Convertible Debentures (NCDs) of the Corporate Debtor under a specific fund scheme. The second petitioner, acting as the Debenture Trustee, held security interest created under the Debenture Trust Deed for the benefit of the debenture holders. Various documents, including the Debenture Trust Deed, were submitted to establish the investment and security interest.

Issue 3: Existence of debt and default confirmed.
The petitioners provided evidence of the investment in NCDs by the first petitioner, supported by relevant financial documents and confirmations from the Corporate Debtor. Legal notices were issued regarding defaults in payment, acknowledging the outstanding dues and requesting immediate repayment. The Corporate Debtor's response citing force majeure events was deemed insufficient, confirming the existence of debt and default.

Issue 4: Legal notices issued regarding default in payment.
Multiple legal notices were issued by the Investment Manager and the Debenture Trustee regarding defaults in payment of principal amounts due on specific dates. The Corporate Debtor's responses and justifications for the defaults were considered inadequate, leading to the escalation of the matter and the initiation of insolvency proceedings.

Issue 5: Invocation of consequences of an event of default.
The Debenture Trust Deed contained provisions outlining the consequences of an event of default, empowering the Investment Manager to declare the outstanding debentures due and payable immediately. The Investment Manager exercised this right, declaring the entire outstanding amount due and initiating insolvency proceedings due to non-payment by the Corporate Debtor.

Issue 6: Appointment of Interim Resolution Professional.
The Tribunal admitted the petition, appointing an Interim Resolution Professional to oversee the insolvency resolution process. Various directions were issued, including imposing a moratorium, ensuring the continuity of essential goods or services, and specifying the effect of the moratorium until the resolution process is completed or liquidation is ordered.

This detailed analysis of the judgment highlights the legal grounds, evidence, and procedural steps leading to the admission of the petition and the appointment of an Interim Resolution Professional for the Corporate Debtor.