2020 (3) TMI 488 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debta nd default or not - pledge of dematerialized shares - HELD THAT - The said is due on the Corporate Debtor and there is a default in making the payment towards the liability to the Petitioner. This fact is even not denied by the Corporate Debtor which is also evident from the documents including the various e-mails. The Corporate Debtor contended that the petitioner sold the pledged shares at a lower price and therefore, this petition is not maintainable because the petitioner who is the pawnee in this case is not in a position to redeliver the security pledged and thus cannot obtain a decree - the petitioner was not under an obligation to inform the Corporate Debtor before selling the shares pledged. Also, the pledged shares were all in DEMAT form and not in physical form - It is well settled principle by the judgments of various High Courts, that the pledged of dematerialized shares is not possible under the provisions of the Contract Act and the pledgement of the dematerialized shares are only governed by Depositors and Regulations (58) (1) to (6) made thereunder and hence section 176 of the Contract Act will not apply in the present matter. The contention of the Corporate Debtor cannot be relied upon and it cannot be denied that they are liable to pay to the petitioner the amounts due upon them and here it is pertinent to note that the Corporate Debtor time and again requested the petitioner for restructuring of the loan amount. Therefore, it can be said that there was an acknowledgement of the debt by the Corporate Debtor. This Adjudicating Authority, on perusal of the documents filed by the Creditor, is of the view that the Corporate Debtor defaulted in repaying the loan availed. In the light of above facts and circumstances, the existence of debt and default is reasonably established by the petitioner/Financial Creditor as a major constituent for admission of a petition under section 7 of the I B Code. Therefore, the Application under sub-section (2) of section 7 is taken as complete, accordingly this Bench hereby admits this Petition - Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Default in repayment of loan by the Corporate Debtor.
2. Validity of the sale of pledged shares by the Petitioner.
3. Alleged mismanagement and restructuring requests by the Corporate Debtor.
4. Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Default in repayment of loan by the Corporate Debtor:
The Petitioner, a bank, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to default in repayment of loan agreements and credit facilities. The Petitioner had disbursed a total of ?30,00,00,000/- through three term loans, with a defaulted amount of ?27,57,60,105.77/- along with interest. The Corporate Debtor admitted to receiving the loan and the non-payment, requesting restructuring instead.

2. Validity of the sale of pledged shares by the Petitioner:
The Corporate Debtor contended that the Petitioner sold the pledged shares at a lower price and without proper notice, causing significant financial loss. The Petitioner argued that they were entitled to sell the pledged shares under the Pledge Agreements and had informed the Corporate Debtor via emails. The Tribunal referred to the judgment in Tendril Financial Services (P.) Ltd. v. Namedi Leasing & Finance Ltd., stating that prior notice under Section 176 of the Contract Act is not required for dematerialized shares, governed by Depositories Act and Regulations.

3. Alleged mismanagement and restructuring requests by the Corporate Debtor:
The Corporate Debtor argued that their financial condition worsened due to external factors and that the Petitioner’s actions, including the sale of pledged shares, exacerbated their situation. The Petitioner countered that restructuring could not be granted once the account was classified as NPA, adhering to RBI guidelines. The Tribunal noted that the Corporate Debtor had acknowledged the debt and requested restructuring, indicating their liability.

4. Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Corporate Debtor challenged the maintainability of the petition, claiming the Petitioner could not re-deliver the pledged security. The Tribunal found that the Petitioner had complied with legal requirements and RBI directives in declaring the account as NPA and selling the shares. The Tribunal concluded that the petition met all conditions for admission under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Conclusion:
The Tribunal admitted the petition, establishing the existence of debt and default by the Corporate Debtor. The order prohibited suits or proceedings against the Corporate Debtor, transferring or disposing of assets, and actions to enforce security interests. The Tribunal appointed an Interim Resolution Professional to carry out the functions under the Insolvency & Bankruptcy Code, 2016, and directed the Registry to communicate the order to both parties immediately.