2020 (9) TMI 895 - 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 - There is no doubt that there is an admitted debt and a default as per the agreed terms between the two parties. On the other hand the Petitioner admits that the present loan was renewed as the Respondent had been repaying the earlier debts. Thus, there is a running account between the two and the Respondent has given an undertaking that it has made arrangements for paying the debt and only requires some more time to settle the debt. No case has been made out by the Petitioner that the Respondent has become insolvent or has lost its substratum such that it cannot pay its debts or run its business. On the other hand, the Respondent is a leading renewable energy developer in Karnataka, and employs over 200 employees across its 21 power generation projects, with a total revenue of ₹ 177.50 Crore. Hence, it would defeat the purpose of the Code, if a going concern generating good revenue and having a huge number of employees is subjected to the rigours of corporate insolvency resolution process. In the facts of the instant case as brought on record and discussed above, especially that it has already received funds to be utilised for repaying its debts, we are of the considered view that the Respondent's plea that it be given some more time to repay the debt needs to be accepted, and the Respondent/Corporate Debtor be directed to settle the debt at the earliest in consultation with the Petitioner/Financial Creditor - considering the amount involved and the present economic scenario, despite the argument of the Petitioner that it is a fit case for admission. Petition disposed of by directing the Respondent / Corporate Debtor to repay the balance debt or the amount as settled with the Petitioner within a period of 60 days, failing which the Petitioner would be at liberty to file a fresh petition for admission.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process (CIRP) under IBC, 2016 due to default in repayment.

Analysis:
1. The case involved a petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 seeking initiation of CIRP against the Corporate Debtor for defaulting on a financial debt amounting to ?2,59,47,000 as of a specific date. The Petitioner extended financial assistance through Inter Corporate Deposits (ICDs) at an interest rate of 16% per annum, which the Respondent failed to repay as per the agreed terms.

2. The Petitioner provided detailed information regarding the financial assistance extended to the Respondent through various ICDs, which were not repaid within the stipulated periods, leading to the default situation. The Respondent, a renewable energy developer, acknowledged the outstanding debt but requested additional time for settlement, citing arrangements with major creditors and receipts from energy sales.

3. The Respondent's Counsel argued that the company, being a going concern with substantial revenue and employee strength, had settled dues with other creditors and had the capacity to repay the Petitioner. The Respondent presented an Escrow Agent Agreement with a major creditor to support its claim of financial stability and ability to clear debts.

4. The Tribunal considered the submissions from both parties, acknowledging the admitted debt and default. The Tribunal referred to relevant legal precedents emphasizing that the IBC should not be misused to push solvent companies into insolvency and highlighted the need to support businesses facing financial distress, especially in the context of the COVID-19 pandemic.

5. Given the economic challenges posed by the pandemic and the Respondent's demonstrated ability to repay debts, the Tribunal decided to grant the Respondent an additional 60 days to settle the outstanding debt with the Petitioner. The Tribunal emphasized the importance of supporting businesses during challenging times and directed the Respondent to clear the debt within the specified period, failing which the Petitioner could file a fresh petition for admission.

6. The judgment balanced the interests of both parties, considering the financial stability of the Respondent, the impact of the pandemic on businesses, and the need to ensure fair treatment while upholding the principles of the Insolvency and Bankruptcy Code.