2019 (11) TMI 444 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in making repayment - existence of dispute - HELD THAT - Since the Corporate Debtor had availed the loan facilities from the Financial Creditor and had executed the Loan Agreement and all the Security documents in favour of the Financial Creditor and committed a default in repayment and ultimately was declared a Non-Performing Assets, we are fully satisfied and have no option but to admit the application and initiate Corporate Insolvency Resolution Process under section 7 of the Insolvency Bankruptcy Code read with Rule 4 against the Corporate Debtor. Application admitted - moratorium declared.

Summary

Issues Involved:
1. Application under Section 7 of the Insolvency & Bankruptcy Code, 2016.
2. Default in repayment of loan by the Corporate Debtor.
3. Classification of loan accounts as Non-Performing Assets (NPA).
4. Initiation of Corporate Insolvency Resolution Process (CIRP).
5. Appointment of Interim Resolution Professional (IRP).
6. Declaration of Moratorium.

Issue-wise Detailed Analysis:

1. Application under Section 7 of the Insolvency & Bankruptcy Code, 2016:
The application was filed by the Financial Creditor, United Bank of India, under Section 7 of the Insolvency & Bankruptcy Code, 2016 read with Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The application sought to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, M/s. Sarnamoy Plastic Sack Manufacturing Private Limited.

2. Default in repayment of loan by the Corporate Debtor:
The Corporate Debtor had requested and was sanctioned various loans by the Financial Creditor, including a project loan and working capital. The Corporate Debtor secured these loans through mortgages and hypothecation of assets. Despite these arrangements, the Corporate Debtor failed to maintain the loan accounts as per the terms of the Sanction Letter, leading to defaults in repayment.

3. Classification of loan accounts as Non-Performing Assets (NPA):
Due to insufficient transactions and failure to regularize the accounts, the Financial Creditor classified the loans as Non-Performing Assets (NPA) effective from 30th September, 2017, following RBI Circulars and Guidelines. A statutory Demand Notice under Section 13(2) of the SARFAESI Act, 2002, was issued to the Corporate Debtor and its Directors/Guarantors demanding repayment of the outstanding amount.

4. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Tribunal, after examining the documents and evidence provided by the Financial Creditor, including bank statements, CIBIL reports, and audited balance sheets, was satisfied with the case presented. The Tribunal admitted the application and initiated the CIRP against the Corporate Debtor under Section 7 of the Insolvency & Bankruptcy Code, 2016.

5. Appointment of Interim Resolution Professional (IRP):
The Financial Creditor proposed the name of an Insolvency Professional, Mr. Sanjeev Jhunjhunwala, who consented to act as the Interim Resolution Professional (IRP). The Tribunal appointed Mr. Jhunjhunwala as the IRP to ascertain the particulars of creditors and convene a meeting of the Committee of Creditors for evolving a resolution plan.

6. Declaration of Moratorium:
Upon admission of the application, the Tribunal declared a moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016. The moratorium prohibits:
- The institution or continuation of suits or proceedings against the Corporate Debtor.
- Transferring, encumbering, or disposing of any assets of the Corporate Debtor.
- Actions to foreclose, recover, or enforce any security interest.
- Recovery of any property by an owner or lessor occupied by the Corporate Debtor.

The supply of essential goods or services to the Corporate Debtor shall not be terminated during the moratorium period. The moratorium remains effective from the date of admission until the completion of the CIRP, unless a resolution plan is approved or a liquidation order is passed.

Order:
The Tribunal passed the following orders:
- Admission of the application under Section 7 of the Insolvency & Bankruptcy Code, 2016.
- Declaration of moratorium as per Section 14.
- Appointment of Mr. Sanjeev Jhunjhunwala as the Interim Resolution Professional.
- Direction to the IRP to convene a meeting of the Committee of Creditors within 105 days.
- Communication of the order to the concerned parties by Speed Post and E-mail.
- Listing the matter on 26th August, 2019, for filing the progress report.
- Issuance of certified copies of the order upon compliance with requisite formalities.