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2020 (4) TMI 510 - Tri - Insolvency and BankruptcyMaintainability of petition - initiation of CIRP - Financial debt - existence of debt and dispute or not - HELD THAT - The constitution of Financial Creditor as an NBFC is evidenced by the certificate of registration issued by the RBI. The grant of financial assistance is evidenced by the banking transactions. The accepted liability to pay interest thereon finds corroboration by tender of interest and deduction of TDS duly deposited with the Income-tax Authority and substantiated by Form 26AS of the Financial Creditor. The resistance raised by the Corporate Debtor that the same was not a loan, finds no merit with this Bench. This Bench has taken note of the fact that a record of disbursal of the amount by the petitioner, a Non-Banking Financial Company, to the Corporate Debtor is vide a Banking transactions. The Corporate Debtor therefore cannot dispute the same. It has also not been repudiated that the debt has not been repaid - the insistence of the Corporate Debtor that the transaction is not a financial debt is inexplicable. The Act does require that a financial obligation shall only arise upon the terms being reduced into writing. Ld. PCS has cogently explained that the transaction does not get vitiated for want of an agreement in terms of section 186(11) of the Companies Act, 2013. The resistance of the prayer by the Corporate Debtor has no legs to stand upon. The defence is frivolous raised in a desperate attempt to resist initiation of the CIR process. This Bench is therefore of the opinion that Operational Creditor is entitled to seek initiation of the CIR process of the Corporate Debtor for its inability to liquidate its dues. Accordingly, this petition is Admitted. Petition admitted - moratorium declared - Report be filed before this Bench on 11th March, 2020.
Issues:
1. Failure of the Corporate Debtor to service interest on financial assistance. 2. Dispute over the nature of financial transaction. 3. Validity of the claim as a financial debt. 4. Admissibility of the petition for Corporate Insolvency Resolution Process (CIR). Issue 1: Failure to Service Interest The petitioner, a non-banking financial corporation, provided financial assistance to the Corporate Debtor, which failed to service the interest. The loan was recalled due to non-payment, leading to the initiation of the CIR process. Issue 2: Dispute Over Financial Transaction The Corporate Debtor resisted the petition, arguing the absence of a contractual agreement, undefined loan period, and lack of clarity on interest payment terms. The Financial Creditor relied on precedents and bank statements to establish the legitimacy of the financial claim. Issue 3: Validity of Claim as Financial Debt The Financial Creditor justified the claim as a financial debt under section 5(8)(a), supported by the nature of the transaction, interest payment evidence, and adherence to accounting practices. The Corporate Debtor's denial was deemed unsubstantiated. Issue 4: Admissibility of CIR Petition The Tribunal found in favor of the Financial Creditor, dismissing the Corporate Debtor's defense as frivolous. The petition was admitted, imposing a moratorium under section 14 of the Code, appointing an Interim Resolution Professional, and setting deadlines for further proceedings. In summary, the judgment addressed the failure of the Corporate Debtor to meet financial obligations, the dispute over the transaction's nature, the validation of the claim as a financial debt, and the admissibility of the CIR petition. The Tribunal ruled in favor of the Financial Creditor, emphasizing the evidence presented and legal provisions to support the initiation of the CIR process.
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