2020 (4) TMI 149 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - It is evident from the record that the application has been filed on the proforma prescribed under rule 4 (2) of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with section 7 of the Code. We are satisfied that a default amounting to lacs of rupees has occurred. As per requirement of section 4 of the Code if default amount is one lac or more then the CIR Process would be issued. The application under sub-section 2 of section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. This petition is admitted and Mr. Umesh Garg is appointed as an Interim Resolution Professional - Application admitted - Moratorium declared.

Summary

Issues Involved:
1. Triggering of Corporate Insolvency Resolution Process (CIRP).
2. Classification of the account as Non-Performing Asset (NPA).
3. Validity and sufficiency of loan documents and evidence.
4. Allegations of excessive interest rates and improper documentation.
5. Declaration of moratorium and appointment of Interim Resolution Professional (IRP).

Detailed Analysis:

1. Triggering of Corporate Insolvency Resolution Process (CIRP):
The Financial Creditor, Oriental Bank of Commerce, filed a petition under Section 7 of the Insolvency & Bankruptcy Code, 2016, to initiate CIRP against the Corporate Debtor, M/s. Piyush Colonisers Limited. The petition was supported by evidence of financial debt amounting to ?28,43,24,725/- as of January 14, 2019, which included principal, accrued interest, and other miscellaneous charges. The Tribunal found that the Financial Creditor successfully established a case for triggering CIRP, as the loan was sanctioned, disbursed, and utilized by the Corporate Debtor, and the loan agreements were properly executed. The Tribunal noted that the application was complete in all respects as per Section 7(2) of the Code.

2. Classification of the account as Non-Performing Asset (NPA):
The Corporate Debtor opposed the petition, asserting that the account was never declared as NPA per Reserve Bank of India guidelines. However, the Tribunal held that the declaration of NPA is immaterial for the purpose of Section 7 application. The primary consideration is whether there is a debt due and whether there has been a default in paying the financial debt. The Tribunal cited the National Company Law Appellate Tribunal's decision in Ranjit Kapoor v. Asset Reconstruction Co. (India) Ltd., stating that NPA provisions relate to the SARFAESI Act, 2002, and have no bearing on the Code.

3. Validity and sufficiency of loan documents and evidence:
The Financial Creditor provided various documents related to the disbursement of the loan, including the statement of accounts certified under the Bankers' Books Evidence Act, 1891. The Tribunal found these documents sufficient to establish the financial debt. The Tribunal emphasized that a certified copy of an entry in a banker’s books is prima facie evidence of the existence of such entry and must be admitted as sufficient evidence of the matters recorded therein.

4. Allegations of excessive interest rates and improper documentation:
The Corporate Debtor alleged that excessive interest rates were charged and that signatures were obtained on blank documents. The Tribunal dismissed these allegations, stating that the interest was charged per the terms of the sanction letter and the loan agreements were duly executed. The Tribunal noted that the Corporate Debtor had never raised these issues from 2014 until the present proceedings, indicating that the defense lacked substance.

5. Declaration of moratorium and appointment of Interim Resolution Professional (IRP):
The Tribunal admitted the petition and appointed Mr. Umesh Garg as the Interim Resolution Professional. A moratorium was declared per Section 14 of the Code, prohibiting the institution or continuation of suits, transferring or disposing of assets, and actions to foreclose or recover any security interest. The Tribunal directed the IRP to make a public announcement regarding the admission of the application and to perform his functions as per the Code. The Tribunal also directed the ex-management to provide all necessary documents and information to the IRP within one week.

The Tribunal concluded by directing the Financial Creditor to deposit ?2 lakhs with the IRP for expenses and instructed the office to communicate the order to relevant parties and update the status of the Corporate Debtor on the Registrar of Companies' website.