2020 (6) TMI 228 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition. This Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor - Petition admitted - moratorium declared.

Summary

Issues:
- Initiation of Corporate Insolvency Resolution Process under section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC)
- Default in repayment of loan by the Corporate Debtor
- Defense raised by the Corporate Debtor under section 240A of the IBC
- Admission of the Petition and appointment of Interim Resolution Professional

Issue 1: Initiation of Corporate Insolvency Resolution Process under section 7 of the IBC

The Company Petition was filed by the Financial Creditor seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor based on a loan default. The Financial Creditor established the existence of debt and default, meeting the requirements under section 4(1) of the IBC. The Corporate Debtor admitted the liability but raised a defense under section 240A of the IBC, which was deemed inapplicable at the admission stage. The Adjudicating Authority found the petition complete and admitted it, ordering the initiation of CIRP against the Corporate Debtor.

Issue 2: Default in repayment of loan by the Corporate Debtor

The Financial Creditor provided detailed evidence of the loan disbursement, security arrangements, bounced cheques, and default amounts. The Corporate Debtor admitted the liability but cited financial difficulties due to factors like demonetization and economic slowdown. Despite the admission of liability, the Corporate Debtor's request for resolution under section 240A was not considered at the admission stage. The Adjudicating Authority confirmed the default, leading to the admission of the Petition and initiation of CIRP.

Issue 3: Defense raised by the Corporate Debtor under section 240A of the IBC

The Corporate Debtor, a micro-scale manufacturing unit, sought relief under section 240A of the IBC due to financial challenges arising from external factors impacting its business. The defense was based on the plea for a self-resolution plan by the Director of the Corporate Debtor to address the debt issue. However, the Adjudicating Authority ruled that section 240A benefits could not be considered at the admission stage, leading to the admission of the Petition and initiation of CIRP against the Corporate Debtor.

Issue 4: Admission of the Petition and appointment of Interim Resolution Professional

Following a thorough review of arguments and evidence presented by both parties, the Adjudicating Authority admitted the Petition and ordered the initiation of CIRP against the Corporate Debtor. An Interim Resolution Professional was appointed to oversee the resolution process, with specific directions regarding the moratorium, management during CIRP, and financial obligations. The Authority also instructed the communication of the order to relevant parties and regulatory authorities, ensuring compliance with the IBC provisions.

This comprehensive analysis of the judgment highlights the key legal aspects, arguments, and decisions made by the Adjudicating Authority in the case involving the initiation of Corporate Insolvency Resolution Process under the Insolvency & Bankruptcy Code, 2016.