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2020 (12) TMI 154 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - recovery proceedings under the SARFAESI Act, 2002 by taking possession of the property under Section 13(4) of the SARFAESI Act, 2002 is already in process - validity of initiation of parallel proceedings under IBC, 2016 to recover the said sum from the Corporate Debtor - HELD THAT - The identical issue fell for consideration before the Hon'ble NCLAT in the matter of Rakesh Kumar Gupta -Vs- Mahesh Bansal Anr. 2020 (6) TMI 688 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI where it was held that The pendency of actions under the SARFAESI Act or actions under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 does not create obstruction for filling an Application under Section 7 of Insolvency and Bankruptcy Code 2016, specially in view of Section 238 of IBC. The Application is more to bring about a Resolution of Corporate Debtor than any penal action or any recovery proceedings. Thus, it is now trite that pendency of actions under the SARFAESI Act by the Financial Creditor is not a bar for filling an Application under Section 7 of IBC, 2016, especially in view of Section 238 of IBC. Further, the proceedings under IBC, 2016 cannot be said to be a parallel proceedings since the Application under Section 7 of IBC, 2016 is filed to bring about a Resolution for the Corporate Debtor, on the other hand the proceedings under SARFAESI Act, 2002 is for recovery of the amount which is due and payable to the Financial Creditor. Thus, there is a debt and default on the part of the Corporate Debtor and the Corporate Debtor is unable to repay its dues to the Financial Creditor - this Application as filed by the Applicant - Financial Creditor is required to be admitted under Section 7 (5) of the I B Code, 2016. Application admitted - moratorium declared.
Issues Involved:
1. Validity of the application under Section 7 of the Insolvency & Bankruptcy Code, 2016. 2. Allegation of non-disclosure of material facts by the Financial Creditor. 3. Whether parallel proceedings under SARFAESI Act, 2002 and IBC, 2016 are permissible. 4. Determination of the existence of "Financial Debt" and "Default." 5. Admissibility of the application based on the amount in default and the threshold limit. 6. Appointment of the Interim Resolution Professional (IRP) and initiation of the Corporate Insolvency Resolution Process (CIRP). Issue-wise Detailed Analysis: 1. Validity of the application under Section 7 of the Insolvency & Bankruptcy Code, 2016: The application was filed by the Financial Creditor under Section 7 of the IBC, 2016, claiming a sum of ?2,82,36,066/- against the Corporate Debtor. It was established that the Corporate Debtor had defaulted on the loan repayment, and the account was classified as Non-Performing Asset (NPA) on 31.10.2016. The Tribunal found the application to be valid and complete, thus satisfying the requirements under Section 7. 2. Allegation of non-disclosure of material facts by the Financial Creditor: The Corporate Debtor argued that the Financial Creditor failed to disclose that only ?2,00,00,000/- was disbursed out of the sanctioned ?3,00,00,000/-. Additionally, it was contended that the mortgaged property had already been taken possession of by the Financial Creditor under the SARFAESI Act, 2002, which was not disclosed in the application. However, the Tribunal did not find these allegations sufficient to dismiss the application. 3. Whether parallel proceedings under SARFAESI Act, 2002 and IBC, 2016 are permissible: The Tribunal referred to precedents, including the Hon'ble NCLAT's decision in Rakesh Kumar Gupta -Vs- Mahesh Bansal & Anr. and the Hon'ble Madras High Court's decision in M/s. Anandram Developers Pvt. Ltd. & Anr. -Vs- The National Company Law Tribunal & Anr., which clarified that the pendency of actions under the SARFAESI Act does not bar the filing of an application under Section 7 of the IBC, 2016. The Tribunal concluded that proceedings under IBC, 2016 aim to bring about a resolution for the Corporate Debtor, unlike recovery proceedings under the SARFAESI Act. 4. Determination of the existence of "Financial Debt" and "Default": The Tribunal found that there was a clear existence of financial debt and default on the part of the Corporate Debtor. The Corporate Debtor's arguments regarding the set-off of the property value against the outstanding loan were not accepted as a valid dispute against the financial debt and default. 5. Admissibility of the application based on the amount in default and the threshold limit: The application was filed before the threshold limit was increased from ?1 lakh to ?1 crore. The amount claimed in default exceeded ?1 crore, making the application admissible. Additionally, the default occurred prior to the period excluded by Section 10A of IBC, 2016, thus not affecting the application's validity. 6. Appointment of the Interim Resolution Professional (IRP) and initiation of the Corporate Insolvency Resolution Process (CIRP): The Financial Creditor proposed Mr. A. Mohan Kumar as the IRP, and his appointment was accepted by the Tribunal. The Tribunal ordered the initiation of the CIRP, superseding the powers of the Board of Directors of the Corporate Debtor. A moratorium was declared as per Section 14 of the IBC, 2016, prohibiting certain actions against the Corporate Debtor during the CIRP. Conclusion: The application under Section 7 of the IBC, 2016, was admitted, and the CIRP was initiated against the Corporate Debtor. The IRP was appointed, and a moratorium was declared, effectively bringing the Corporate Debtor under the resolution process as per the provisions of the IBC, 2016.
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