2020 (2) TMI 1119 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - dishonor of cheque - financial debt - debt due and payable or not - HELD THAT - The Financial Creditor has succeeded to make out a case for triggering the Corporate Insolvency Resolution Process. The material on record clearly goes to show that the Corporate Debtor had availed the loan facility and has committed default in the payment of the said debt amount. The applicant 'financial creditor' has placed on record evidence in support of the claim as well as to prove the default. The Corporate Debtor by its own admission in reply acknowledges the existence of financial debt. Merely because respondent has stated that it is willing to settle the debt and in spite of being given various opportunities for repayment, the respondent failed to make payment. There is no bar for Financial Creditor from proceedings under the provisions of Code. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of the Code - We are satisfied that a default has occurred and debt has remained unpaid. Thus, the application warrants admission as it is complete in all respects and is admitted initiating CIRP as prescribed under the Code. Petition admitted - moratorium declared.

Issues:
1. Application under Section 7 of The Insolvency and Bankruptcy Code, 2016 by a financial creditor for initiation of Corporate Insolvency Resolution Process.
2. Default in repayment of loan by the corporate debtor.
3. Admissibility of the application and appointment of Insolvency Resolution Professional.
4. Direction for moratorium and deposit by the financial creditor.

Issue 1: Application under Section 7 of The Insolvency and Bankruptcy Code, 2016
The applicant, a financial creditor, filed an application under Section 7 of The Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process against the respondent company, alleging default in repayment of a business loan facility. The applicant provided evidence of the loan agreement, default, and the respondent's acknowledgment of the debt. The Tribunal found the application complete and admitted it as a case for triggering the Corporate Insolvency Resolution Process.

Issue 2: Default in repayment of loan by the corporate debtor
The respondent admitted to availing the credit facility due to a cash crunch but failed to repay the loan amount. The applicant submitted evidence of default, including bounced cheques due to insufficient funds. Despite expressing willingness to settle the debt, the respondent took no concrete steps towards repayment. The Tribunal noted the default occurrence and the unpaid debt, leading to the admission of the application for Corporate Insolvency Resolution Process.

Issue 3: Admissibility of the application and appointment of Insolvency Resolution Professional
The Tribunal examined the application's compliance with Section 7 of the Code and found it complete, leading to the admission of the application. The financial creditor proposed an Insolvency Resolution Professional, satisfying the necessary requirements under the Code. The Tribunal directed the Interim Insolvency Resolution Professional to make a public announcement and imposed a moratorium on the respondent, with specific provisions coming into force during this period.

Issue 4: Direction for moratorium and deposit by the financial creditor
In line with the Code, the Tribunal directed the financial creditor to deposit a specified amount with the Interim Resolution Professional to cover expenses. This deposit was subject to adjustment by the Committee of Creditors and would be repaid to the financial creditor accordingly. Additionally, the Tribunal instructed the registry to communicate the order to relevant parties promptly.

This judgment by the National Company Law Tribunal, New Delhi, involved a detailed analysis of the application under Section 7 of The Insolvency and Bankruptcy Code, 2016, focusing on default in loan repayment, admissibility of the application, appointment of an Insolvency Resolution Professional, and the imposition of a moratorium on the respondent. The Tribunal found in favor of the financial creditor, admitting the application and initiating the Corporate Insolvency Resolution Process due to the respondent's default and failure to repay the loan amount. The judgment emphasized compliance with legal provisions and procedural requirements, ensuring a fair and transparent resolution process in line with the Insolvency and Bankruptcy Code.

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