2019 (7) TMI 962 - Tri - Insolvency and Bankruptcy

Admissibility of petition - Initiation of Corporate Insolvency Resolution Process - Section 10 of the Insolvency Bankruptcy Code, 2016 read with Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - failure in repayment of loan - applicant suffered a loss and as such loan could not be repaid as per terms conditions of repayment schedule - HELD THAT - The requirement to be meted out under section 10 (3) of the I B Code has been complied with by the applicant herein. The applicant has also succeeded in establishing its inability to discharge the debt due to the FCs and thereby defaulted in repayment of the amount found due to the FCs. The application filed under section 10 of the I B Code is complete and that the corporate applicant has committed default in repayment of the loan amount sanctioned by the FCs. The FCs admitted the default and not contested this application - the application is complete, the present application filed under section 10 of the I B Code is liable to be allowed under section 10(4) of I B Code. Application admitted - moratorium declared - List the matter on 05.04.2017, for the filing of the progress report.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency & Bankruptcy Code, 2016.
2. Allegations of non-disbursement of loan amounts by the consortium of banks.
3. Default in repayment of loans by the corporate debtor.
4. Legal proceedings and counterclaims between the corporate debtor and financial creditors.
5. Compliance with procedural requirements under Section 10 of the Insolvency & Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The corporate debtor, Langlai Tea and Industries Ltd., filed an application under Section 10 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of CIRP against itself. The application was supported by various documents, including written communication by the proposed interim resolution professional, copies of ledgers, audited financial statements, and a special resolution passed by the shareholders.

2. Allegations of Non-disbursement of Loan Amounts:
The corporate debtor alleged that the consortium of banks (State Bank of India and Bank of Baroda) did not disburse the loan amounts as per the terms and conditions, leading to the inability to utilize the loan for the intended project. The banks, however, contended that the disbursements were made as per the requirements and conditions of the sanction letter and that there was no demand from the corporate debtor for the release of the remaining amount at the relevant time.

3. Default in Repayment of Loans:
It was admitted that the corporate debtor defaulted in repaying the loan amounts. The corporate debtor attributed the default to the alleged non-disbursement of the full loan amount. The banks argued that the corporate debtor failed to honor its contractual commitment of repayment despite receiving the disbursed loan amounts.

4. Legal Proceedings and Counterclaims:
Several legal proceedings were mentioned, including recovery proceedings initiated by the banks in the Debt Recovery Tribunal (DRT) and subsequent appeals. The DRT initially found a breach of contract by the banks and awarded compensation to the corporate debtor. However, the Debt Recovery Appellate Tribunal (DRAT) reversed this judgment, and the matter was pending appeal. Additionally, the Tea Board filed a Title Suit for the realization of purported debt, and the corporate debtor also filed a counter Title Suit.

5. Compliance with Procedural Requirements:
The Tribunal examined whether the application under Section 10 was complete and met the requirements specified in Section 10(3) of the Insolvency & Bankruptcy Code, 2016. The corporate debtor provided necessary documents, including the information relating to its books of account, the proposed interim resolution professional, and the special resolution passed by the shareholders. The Tribunal found that the corporate debtor complied with these requirements.

Conclusion:
The Tribunal admitted the application filed by Langlai Tea and Industries Ltd. under Section 10 of the Insolvency & Bankruptcy Code, 2016, for initiating CIRP. The Tribunal declared a moratorium in accordance with Sections 13 and 15 of the IBC, 2016, and appointed an Interim Resolution Professional (IRP). The IRP was directed to convene a meeting of the Committee of Creditors and submit a resolution plan within 105 days from the insolvency commencement date. The order emphasized that the existence of debt and default was established and that the application was complete, thereby justifying the initiation of CIRP.