2019 (11) TMI 963 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in making repayment - existence of dispute or not - Section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - In the present case applicant had sanctioned and disbursed the loan which are recoverable with applicable interest by entering in to loan cum Hypothecation Agreements with the respondent borrower. The corporate debtor had undertaken the liability to repay the loan along with the agreed interest. The loan/financial facility was clearly disbursed against the consideration for time value of money with a clear commercial effect of borrowing. Moreover, the debt claimed in the present application includes both the component of outstanding principal and interest. The matter not only the present claim comes within the purview of Financial Debt but also the applicant can clearly be termed as Financial Creditor of the respondent corporate debtor so as to prefer the present application under Section 7 of the Code. As per the provisions of Section 7 of the Code, no prior notice under Section 8 of the Code is required in respect of a financial debt. An application under Section 7 of the Code is acceptable so long as the debt is proved to be due and there has been occurrence of existence of default. What is material is that the default is at least 1 lakh. In view of Section 4 of the Code, the moment default is of Rupees one lakh or more, the application to trigger Corporate Insolvency Resolution Process under the Code is maintainable. In the present case the claimed financial debt in the light of the award exceeds ₹ 564 Lacs and the respondent has defaulted in making payment of the debt. The present application is complete in all respect and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been default in payment of the financial debt - in terms of Section 7(5)(a) of the Code, the present application is admitted.

Issues Involved:
1. Jurisdiction of the Tribunal
2. Status of the Applicant as Financial Creditor
3. Existence of Financial Debt and Default
4. Maintainability of the Application under Section 7 of the Insolvency and Bankruptcy Code
5. Pending Arbitration and Execution Proceedings
6. Objections Raised by the Respondent
7. Appointment of Interim Resolution Professional
8. Declaration of Moratorium

Detailed Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal established its territorial jurisdiction over the NCT of Delhi, as the registered office of the respondent corporate debtor is located in Delhi. This is in accordance with sub-section (1) of Section 60 of the Insolvency and Bankruptcy Code, 2016.

2. Status of the Applicant as Financial Creditor:
The applicant, Shriram Transport Finance Company Limited, is a Non-Banking Financial Company engaged in financing and leasing of vehicles. The Tribunal confirmed that the applicant qualifies as a "Financial Creditor" under Section 5(7) of the Code, having disbursed loans to the corporate debtor against the consideration for time value of money.

3. Existence of Financial Debt and Default:
The Tribunal noted that the corporate debtor had availed a loan of ?2,62,00,000/- through 29 Loan cum Hypothecation Agreements but defaulted in repayment. The financial debt, including interest and expenses, amounted to ?5,64,46,192/- as of 31.12.2018. The Tribunal also referenced the arbitral awards, which directed the corporate debtor to pay the outstanding amount along with interest.

4. Maintainability of the Application under Section 7 of the Insolvency and Bankruptcy Code:
The Tribunal confirmed that the application under Section 7 of the Code was maintainable. The application was complete, and the debt exceeded the threshold limit of ?1 lakh. The Tribunal emphasized that no prior notice under Section 8 of the Code was required for financial debt.

5. Pending Arbitration and Execution Proceedings:
The Tribunal addressed the respondent's objection regarding the pending arbitration and execution proceedings. It clarified that the pendency of such proceedings does not bar the initiation of Corporate Insolvency Resolution Process under Section 7 of the Code. The Tribunal cited the overriding effect of Section 238 of the Code and referenced relevant case laws to support this position.

6. Objections Raised by the Respondent:
The respondent raised multiple objections, including the enforceability of ex-parte arbitral awards and the alleged inflated claim of financial debt. The Tribunal dismissed these objections, stating that the existence of a default was sufficient for admitting the application. The Tribunal also noted that the arbitral awards had not been stayed and were therefore enforceable.

7. Appointment of Interim Resolution Professional:
The Tribunal appointed Mr. Navjit Singh as the Interim Resolution Professional (IRP) and directed the financial creditor to deposit ?2 lakhs with the IRP to cover initial expenses. The Tribunal confirmed that there were no disciplinary proceedings pending against the proposed IRP.

8. Declaration of Moratorium:
The Tribunal declared a moratorium under Section 14 of the Code, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovery of property by owners or lessors. The moratorium did not apply to transactions notified by the Central Government or the supply of essential goods and services.

Conclusion:
The Tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by Shriram Transport Finance Company Limited against M/s. Trans Gulf Frozen Food Containers Private Limited. The Tribunal appointed Mr. Navjit Singh as the Interim Resolution Professional and declared a moratorium in terms of Section 14 of the Code. The Tribunal dismissed the objections raised by the respondent and confirmed that the application was complete and maintainable.

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