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2020 (5) TMI 394 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - It is found that the Petitioner Bank has submitted the documents duly executed by the Corporate Debtors and guarantors along with the Statement of Accounts with Certificate under the Banker's Book of Evidence Act, 1891, in support of their IB Petition for initiation of C.I.R.P. - The CD has defaulted in making repayment of credit facilities to the Petitioner Bank and the date of default is 30-5-2015. The statement of accounts as on 7-7-2018 along with the Banker's Book Evidence Certificate annexed with the Petition confirms the amount in default is ₹ 310,21,71,498.38Ps as on 7-7-2018. Further, the CIBIL Reports submitted by the Applicant Bank confirm the existence of liability to the Financial Creditor and default committed by the Corporate Debtor - The Petitioner Bank has filed the petition within the period of limitation, as the last payment into the account has come on 20-8-2015 and the application has been filed on 13-7-2018 besides submission of OTS Proposal on 25-9-2018. It is a settled legal position that the pendency of SARFAESI proceeding or other dispute does not prevent a Financial Creditor to trigger the C.I.R.P. because the nature of remedy being sought for under the provisions of the I.B. Code is Remedy in Rem in respect of the CD. Also, application is filed by the Respondent under section 60(5) read with section 442 of Companies Act, 2013 against the Applicant Bank with a prayer to refer the matter for mediation and conciliation panel - At this stage, this Adjudicating Authority is only to decide whether the petition filed by the Financial Creditor under section 7 of IBC is to be admitted or rejected, considering the facts that whether the default has occurred or not and the application under section 7 filed under sub-section 2 of the IBC is complete or not in all respects. When the application is yet to be admitted, the question of referring the petition to the Mediation and Conciliation panel does not arise and moreover the Ld. Lawyer of the Financial Creditor strongly opposed to this prayer of the Corporate Debtor as the Applicant Bank has not accepted the OTS proposal submitted on 27-8-2018 and they are not giving consent for referring the mater to Mediation and Conciliation Panel. The present IB Petition is admitted as found complete in all respects - application admitted - moratorium declared.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) 2. Default in repayment of credit facilities 3. Classification of account as Non-Performing Asset (NPA) 4. Maintainability of the application under section 7 of the Insolvency & Bankruptcy Code, 2016 5. Request for mediation and conciliation Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP): The Financial Creditor (Bank of India) filed an application under section 7 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of CIRP against the Corporate Debtor (Jyoti Power Corporation Private Limited) due to default in repayment of various credit facilities. The application was filed by a duly authorized officer of the Bank. 2. Default in Repayment of Credit Facilities: The Corporate Debtor initially availed working capital credit facilities with limits of ?140 crores from Bank of India and ?71.75 crores from IDBI Bank Ltd. The credit facilities were later enhanced to an aggregate limit of ?398 crores. The Corporate Debtor hypothecated its movable assets and executed a memorandum of entry over immovable property to secure these facilities. Despite restructuring and renewal of credit facilities, the Corporate Debtor failed to repay the secured debts, resulting in the account being classified as NPA with effect from 28-10-2013. 3. Classification of Account as Non-Performing Asset (NPA): The Corporate Debtor's accounts were classified as NPA on 28-10-2013, and subsequently, on 30-5-2015, various credit facilities were classified as NPA in the Financial Creditor's books. The Petitioner Bank claimed dues of ?310,21,71,498.38 as on 7-7-2018. The classification was in accordance with RBI policies and directives applicable to restructured facilities. 4. Maintainability of the Application under Section 7 of the Insolvency & Bankruptcy Code, 2016: The Respondent raised preliminary objections regarding the maintainability of the application, arguing that there was no specific power of attorney granted for initiating CIRP and incomplete statements of accounts were provided. The Tribunal found the application complete and within the limitation period, as the last payment was made on 20-8-2015, and the application was filed on 13-7-2018. The Tribunal also noted that the pendency of SARFAESI proceedings or other disputes does not prevent a Financial Creditor from triggering CIRP. 5. Request for Mediation and Conciliation: The Corporate Debtor filed IA 620 of 2019, seeking permission to refer the matter to a mediation and conciliation panel. The Tribunal rejected this request, noting that the application under section 7 of IBC was complete and the question of mediation did not arise at this stage. The Tribunal emphasized that the primary focus should be on whether the default had occurred and if the application was complete. The Tribunal also highlighted that the Corporate Debtor's proposal for a one-time settlement (OTS) of ?77 crores was not accepted by the Financial Creditor. Order: The Tribunal admitted the IB Petition under section 7 of the IBC, 2016, and declared a moratorium prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovery actions against the Corporate Debtor. Mr. Chandra Prakash Jain was appointed as the Interim Resolution Professional (IRP) to manage the CIRP. The Tribunal directed the IRP to adhere to the time limits stipulated for the CIRP and perform duties as specified under the IBC. Separate Judgment: One judge expressed agreement with the conclusion to admit the petition under section 7 of the IBC but provided additional observations on the disposal of IA 620 of 2019, emphasizing that mediation was not appropriate at this stage due to the lack of willingness from the Financial Creditor and the rigid stance taken by the bank. The judge noted that post-admission settlement is permissible under section 12A of the IBC with the consent of 90% of the Committee of Creditors (CoC). The petition was admitted on 5-2-2020, and the Corporate Insolvency Resolution Process commenced from that date.
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