2019 (5) TMI 519 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - default in repayment of loan - Corporate Debtor - HELD THAT - It is seen that no record or factual material or any document/letters evidencing the existence of a dispute could be found, as claimed by the CD. The statements which have been made in the counter and additional counter appear to be without any basis as the CD has not chosen to file any documentary evidence rebutting the statement of accounts submitted by the FC. On perusal of the process file, it is also seen that when this matter came up for hearing on 01.02.2019, 06.02.2019, 13.02.2019 and 22.02.2019, the CD has stated that they are exploring the possibility of a settlement and that settlement talks are in progress. Since no settlement was forthcoming between the parties, this Tribunal reserved its Orders on 27.02.2019. Petition is admitted.

Issues:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) due to default in repayment.
2. Discrepancy in loan accounts leading to withholding of payment by the Corporate Debtor.
3. Pre-existence of dispute and arbitration clause.
4. Submission of documentary evidence and reconciliation of accounts.
5. Admission of Company Petition and commencement of CIRP.

Issue 1: Initiation of Corporate Insolvency Resolution Process (CIRP) due to default in repayment:
The Financial Creditor filed a Company Petition under the Insolvency & Bankruptcy Code for the initiation of CIRP against the Corporate Debtor, citing a default in repaying an amount of &8377; 3,67,40,282.81. The default was considered to have occurred on the date of issuance of a demand/recall notice dated 23.08.2018. The Tribunal found that the Financial Creditor had provided credit facilities to the Corporate Debtor, leading to the initiation of CIRP.

Issue 2: Discrepancy in loan accounts leading to withholding of payment by the Corporate Debtor:
The Corporate Debtor claimed a discrepancy in the loan accounts, stating that the Financial Creditor had charged excess penal interest and had not reconciled the accounts despite requests. The Corporate Debtor withheld payment from April 2018, seeking reconciliation of accounts and credit for the excess penal interest charged. However, the Tribunal observed that the Corporate Debtor had not provided any documentary evidence to support their claims, and the Financial Creditor had fulfilled the terms of the facility agreement, leading to a default by the Corporate Debtor.

Issue 3: Pre-existence of dispute and arbitration clause:
The Corporate Debtor argued that there was a pre-existing dispute between the parties, citing reasons such as the lack of certification of bills, non-acknowledgment of statements of accounts, and non-compliance with the arbitration clause in the agreement. However, the Tribunal found that the Corporate Debtor's contentions lacked merit as they contradicted their earlier statements and failed to provide documentary evidence to support their claims.

Issue 4: Submission of documentary evidence and reconciliation of accounts:
The Financial Creditor submitted various documents, including loan sanction letters, board resolutions, personal guarantees, and records of disbursement, to prove the credit facilities provided to the Corporate Debtor. The Tribunal noted that the Corporate Debtor had not fulfilled the terms of the facility agreement, leading to a default. Despite claims of discrepancies, the Corporate Debtor failed to provide substantial evidence to support their contentions, resulting in the Tribunal's decision to admit the Company Petition and commence CIRP.

Issue 5: Admission of Company Petition and commencement of CIRP:
Based on the submissions and evidence presented by both parties, the Tribunal admitted the Company Petition and ordered the commencement of CIRP. A moratorium was declared to prohibit certain actions against the Corporate Debtor, and an Interim Resolution Professional was appointed to oversee the resolution process. The Tribunal's decision was made after considering the lack of settlement between the parties and the absence of documentary evidence supporting the Corporate Debtor's claims.

This detailed analysis of the judgment highlights the key issues addressed by the Tribunal and the rationale behind its decision to admit the Company Petition and commence the Corporate Insolvency Resolution Process.

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