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2019 (7) TMI 508 - Tri - Insolvency and BankruptcyAdmissibility of petition - Initiation of Corporate Insolvency Resolution Process - existence of debt or not - section 7 of The Insolvency and Bankruptcy Code 2016 - HELD THAT - The scheme of the code is to ensure that when a default takes place in the sense that a debt become due and is not paid the Insolvency Resolution Process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt once it become due and payable which includes non-payment of even part thereof or an instalment amount. The meaning of debt as per Section 3(11) is liability or obligation in respect of a claim and the meaning of claim as per Section 3(6) means a right to payment even if it is disputed. The Code gets triggered the moment default is rupees one lakh or more (Sec. 4). Initiation of Corporate Insolvency Resolution Process under Section 7 or 9 do not amount to recovery proceedings the question of deciding the claim which may include the interest by the Adjudicating Authority does not arise for the purpose of triggering the Corporate Insolvency Resolution Process. It is clear that the application being complete and in absence of any other infirmity and the corporate debtor having not denied the debt and default the adjudicating authority cannot reject the application preferred by the appellant company - there is admitted debt and efforts are/were being made by the respondent to come out of the financial obligations. Existence of default - HELD THAT - There is no dispute in the case that the petitioner is the financial creditor - On perusal of record it is held that there is existence of default. The application under Section 7(2) of the Code is also complete in all respect. The petitioner/financial creditor having fulfilled all the requirements of Section 7 of the Code the instant petition deserves to be admitted - Petition admitted - moratorium declared.
Issues Involved:
1. Validity of the Power of Attorney. 2. Calculation of interest rate. 3. Existence of debt and default. 4. Completeness of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. Detailed Analysis: 1. Validity of the Power of Attorney: The respondent contested the validity of the Power of Attorney (PoA) executed by the applicant company, arguing that it was signed by two directors without a supporting Board Resolution. However, the tribunal found that the PoA, signed by two directors authorizing the holder to initiate insolvency proceedings, was sufficient. 2. Calculation of Interest Rate: The respondent objected to the interest rate calculation, noting a discrepancy between the agreed rate of 10.25% p.a. as per the common loan agreement and the 14.75% p.a. calculated by the applicant from March 2014. The tribunal referred to the Hon’ble NCLAT decision in Naveen Luthra v. Bell Finvest (India) Ltd., which held that an application under Section 7 of the IB Code cannot be rejected on the grounds of "usurious and extortionate penal interest." The tribunal concluded that the interest rate issue did not invalidate the application. 3. Existence of Debt and Default: The tribunal emphasized that the Code's scheme ensures the initiation of the Insolvency Resolution Process upon the occurrence of a default, defined broadly as non-payment of a debt when due. The tribunal cited the Hon’ble Supreme Court decision in Innoventive Industries Ltd. v. ICICI Bank, which clarified that the adjudicating authority must admit an application if satisfied that a default has occurred, provided the application is complete. The tribunal noted that the respondent had admitted the debt in various communications, including letters proposing one-time settlements and requesting operational continuance. 4. Completeness of the Application: The tribunal confirmed that the application was complete, filed in the prescribed Form-1, and accompanied by the necessary documents, including the proposed Interim Resolution Professional's details. The tribunal found no infirmity in the application, satisfying the requirements of Section 7 of the Code. Conclusion: The tribunal concluded that the application was complete and that there was an admitted debt and default. Consequently, the petition was admitted, and a moratorium was declared under Section 14 of the Code, prohibiting suits, asset transfers, foreclosure actions, and recovery of property by owners or lessors. The tribunal directed that the supply of essential goods and services to the Corporate Debtor should not be interrupted during the moratorium period. The order would remain effective until the completion of the corporate insolvency resolution process or until an order for liquidation is passed. Final Orders: The petition was admitted, and the moratorium was declared. The tribunal disposed of the petition with no order as to costs and directed communication of the order to the relevant parties.
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