2020 (10) TMI 168 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - 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 - It has already settled debts worth ₹ 36,81,38,388/- to several creditors who have approached this Tribunal. Since the Respondent is in the business of generating and selling power, its liabilities are paid out of its periodical receipts. The impact of the present financial distress caused by the global novel corona virus pandemic necessitating a nationwide lockdown, cannot be ignored. Major decisions have been taken to protect Industry from its effects, to inject economic stimulus and to revive the economy. More specifically, on 24.03.2020 the Legislature increased the minimum threshold of default from ₹ 1 Lakh to ₹ 1 Crore so that the Code is not used merely for recovery of debt. Modifications and suspension of various provisions of the Code have been initiated so that companies facing financial stress due to the pandemic can be supported rather than be pushed into CIRP, else in the present scenario they may end up in liquidation and lose value further, which is the not objective of the IBC or other enactments. Steps have also been taken to ensure availability of more funds in the hands of businesses so that they can cope with the present economic scenario and restart their business 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 - Petition is 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 under IBC, 2016
- Default in repayment of loan amount
- Settlement negotiations and time extension request
- Legal provisions and precedents regarding insolvency resolution

Initiation of Corporate Insolvency Resolution Process under IBC, 2016:
The case involved a petition filed by a financial creditor against a corporate debtor for initiating the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. The financial creditor alleged a default of a substantial amount by the corporate debtor, seeking resolution through the legal process.

Default in Repayment of Loan Amount:
The financial creditor provided loans to the corporate debtor, who defaulted in repayment from a certain point onwards. Despite some partial repayments, the overall default persisted, leading to the initiation of insolvency proceedings. The financial creditor detailed the loan disbursements, renewals, and subsequent defaults by the corporate debtor, which formed the basis of the legal action.

Settlement Negotiations and Time Extension Request:
During the proceedings, the legal counsels for both parties engaged in settlement negotiations. The corporate debtor sought additional time to settle the financial dues, citing its business operations and receipt of funds from other sources. The financial creditor pressed for immediate resolution, while the corporate debtor presented agreements and assurances regarding repayment.

Legal Provisions and Precedents Regarding Insolvency Resolution:
The judgment referenced legal provisions under the Insolvency and Bankruptcy Code, 2016, and highlighted relevant precedents set by the Hon'ble Supreme Court. The court emphasized that insolvency proceedings should not be misused for debt recovery and should not harm the financial stability of a viable company. The judgment considered the impact of the COVID-19 pandemic and legislative modifications to protect businesses facing financial distress.

In the final ruling, the Tribunal disposed of the petition by directing the corporate debtor to repay the outstanding debt within 60 days, failing which the financial creditor could file a fresh petition for admission. The decision balanced the urgency of debt repayment with the economic circumstances and the corporate debtor's ability to settle the dues, reflecting a nuanced approach to insolvency resolution.