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2020 (12) TMI 1174 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor has committed default in paying the financial debt - Existence of debt and default or not - HELD THAT - In this case, it is not in dispute that Corporate Debtor has committed default in paying the debt in entirety. From the documents produced by the Financial Creditor, it is apparent that as per revised payment schedule arrived at after restructuring of Term Loan, the amount is payable in 2015-2016, 2016-2017, 2017-2018 2018-2019. Further, record of default as per Information Utility Report dated 24.08.2020 has also been produced by the Financial Creditor. These facts clearly establish that the debt is due and payable both in law and in fact. It is now well settled law that in the proceeding under Section 7 of the Insolvency and Bankruptcy Code, 20, Adjudicating Authority has to see only two relevant facts (i) whether debt more than ₹ 1 lakh before 24.03.2020 in case of default prior to that date is due and payable by the Corporate Debtor (ii) whether the Corporate Debtor committed default in paying the debt. In this case, both facts have been established by evidence on record. The Corporate Debtor is required to be admitted in Corporate Insolvency Resolution Process as per Section 7 of the Insolvency and Bankruptcy Code, 2016 - Application admitted - moratorium declared.
Issues:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 filed by the State Bank of India against a Corporate Debtor for default in payment. 2. Dispute regarding the default date and sustainability of the notice under Section 13 of the SARFAESI Act, 2002. 3. Examination of the defense raised by the Corporate Debtor based on DRT and DRAT orders. 4. Analysis of the evidence presented by the Financial Creditor to establish default and due payment of debt. 5. Admission of the Corporate Debtor into Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016. Analysis: The State Bank of India, as the Financial Creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor, alleging default in payment of a significant financial debt. The Corporate Debtor raised a defense challenging the default date claimed by the Financial Creditor, citing the limitation under the Law of Limitation Act, 1963. The Corporate Debtor also relied on the orders of the DRT and DRAT, emphasizing the incorrect declaration of the loan account as NPA and the unsustainable nature of the notice under Section 13 of the SARFAESI Act, 2002. Upon reviewing the orders of the DRT and DRAT, it was found that the date of declaration of the loan account as NPA was disputed, leading to the quashing of the demand notice. However, the Tribunal clarified that the insolvency proceedings were not for loan recovery but for resolution of insolvency due to the default in paying the financial debt. The Tribunal emphasized that the application under Section 7 of the Code is maintainable if default is proven. The Financial Creditor presented evidence, including revised payment schedules and Information Utility Reports, to establish the default and due payment of debt by the Corporate Debtor. The Tribunal concluded that the Corporate Debtor had indeed defaulted in paying the debt, making the application for Corporate Insolvency Resolution Process justifiable. The Tribunal admitted the Corporate Debtor into the resolution process and appointed an Interim Resolution Professional, imposing a moratorium and prohibiting legal actions against the Corporate Debtor's assets. In light of the evidence and legal provisions, the Tribunal directed the Financial Creditor to pay fees to the appointed IRP and issued various directions for the effective management of the Corporate Debtor during the resolution process. The Tribunal's decision to admit the Corporate Debtor into the resolution process was based on the established default and the provisions of the Insolvency and Bankruptcy Code, 2016. This comprehensive analysis covers the key issues and the detailed examination of the judgment delivered by the Tribunal in the case.
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