2020 (4) TMI 506 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of dispute or not - HELD THAT - This is an Application filed under section 7 of the Code by Punjab National Bank for initiating the CIRP process as against the Corporate Debtor alleging default in repayment of loan availed by the Corporate Debtor. The availing of loan and executing the documents as referred to in the Application is not at all under challenge - the ld. Counsel, appearing for the corporate Debtor, has attempted to establish that the demand for repayment of ₹ 15 crore along with interest is actually not due and payable by the Corporate Debtor. What is demanded by the Financial Creditor, here in the case in hand, is the sum of ₹ 22,65,61,156.57, which includes interest @ 16% per annum and the demand was on the basis of terms and conditions in the sanction letter dated 30-07-2012. Admittedly, the Corporate Debtor has committed default. According to the Financial Creditor, the account maintained in the name of the Corporate Debtor has been classified as non-performing asset as on 28-01-2016 and produced record of default (copy of CIBIL Report- Annexure -1 at Page 222) to prove the default - Application admitted - moratorium declared.

Issues involved:
1. Default in repayment of loan by the Corporate Debtor.
2. Maintainability of the Application under section 7 of the Insolvency & Bankruptcy Code, 2016.
3. Establishment of default and admissibility of the Application.
4. Appointment of an Interim Resolution Professional and initiation of Corporate Insolvency Resolution Process.

Issue 1: Default in repayment of loan by the Corporate Debtor:
The Punjab National Bank filed an Application under section 7 of the Insolvency & Bankruptcy Code, 2016 against the Corporate Debtor, alleging default in repayment of a substantial sum, inclusive of interest. The Corporate Debtor had availed loans for a hotel project but failed to operate the loan account as per the terms of sanction, leading to classification as a non-performing asset. Despite demand notices, the Corporate Debtor did not repay the debt, resulting in the initiation of the Corporate Insolvency Resolution Process.

Issue 2: Maintainability of the Application under section 7 of the Insolvency & Bankruptcy Code, 2016:
The Corporate Debtor objected to the Application's maintainability, citing a prior application before the Debt Recovery Tribunal. However, the Tribunal found this objection unsustainable as filing proceedings before the Debt Recovery Tribunal did not bar initiating proceedings before the National Company Law Tribunal. The Corporate Debtor's contention regarding lack of proof of delivery of invoices was deemed inconsistent and not a valid ground for dismissal.

Issue 3: Establishment of default and admissibility of the Application:
The Tribunal examined the evidence provided by the Financial Creditor, including a CIBIL report showing the account as a non-performing asset. The Application was found to be complete, with proper authorization and no pending disciplinary proceedings against the proposed Insolvency Resolution Professional. The Tribunal admitted the Application, declaring a moratorium and appointing an Interim Resolution Professional to initiate the Corporate Insolvency Resolution Process.

Issue 4: Appointment of an Interim Resolution Professional and initiation of Corporate Insolvency Resolution Process:
The Tribunal appointed an Interim Resolution Professional to ascertain creditors' particulars, convene a Committee of Creditors meeting, and identify a prospective Resolution Applicant within the specified timeline. The order of moratorium was declared effective until the completion of the corporate insolvency resolution process, with provisions for essential goods or services supply during the moratorium period. The matter was listed for a progress report filing and directions were issued for communication of the order to all concerned parties.

This judgment by the National Company Law Tribunal, Kolkata, involved a thorough analysis of the default in loan repayment, the maintainability of the Application, the establishment of default, and the subsequent initiation of the Corporate Insolvency Resolution Process. The Tribunal carefully considered the evidence presented, dismissed objections lacking merit, and took necessary steps to ensure the resolution process moved forward effectively.

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