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2021 (1) TMI 386 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - on the garb of OTS settlement the Corporate Debtor wanted to gain time to settle of the dues to the Financial Creditor - debt and default existed or not - HELD THAT - It is a fact borne on record that the Corporate Debtor is unable to repay the dues to the Financial Creditor and as such on the garb of OTS settlement the Corporate Debtor wanted to gain time to settle of the dues to the Financial Creditor. Further, a perusal of the record of proceedings dated 04.02.2020, also shows that the Corporate Debtor was putting in efforts to settle of the dues of the Financial Creditor and upon such representation being made, the Corporate Debtor was granted time to settle the matter and the matter was finally posted to 02.03.2020 for reporting settlement or to proceed with the matter. Thus, when the matter was taken up for enquiry on 02.03.2020, it has been brought to the notice of this Tribunal by the Counsel for the Financial Creditor that the Corporate Debtor has not paid the dues of the Financial Creditor and also the Learned Counsel for the Financial Creditor submitted that even in the affidavit filed by the Corporate Debtor, the outstanding debt has been admitted which is owed to the Financial Creditor. 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. It has also been consistently held by the Hon'ble Supreme Court both in M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. 2017 (9) TMI 58 - SUPREME COURT as well as MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED 2017 (9) TMI 1270 - SUPREME COURT after going through the Scheme of I B Code, 2016 in depth in relation to an Application under Section 7 filed by a Financial Creditor as compared to the one filed under Section 9 by an Operational Creditor, in relation to a Section 7 Application where there is an existence of a 'financial debt' and when there is a default, this Tribunal is bound to admit the Application and as a consequence trigger the Corporate Insolvency Resolution Process (CIRP) and in relation to a Section 7 Application defence of set off or counter claim put forth by the Corporate Debtor cannot be considered as a dispute in relation to the Financial debt and default in relation to it - In the present case, it is clear that there is a default on the part of the Corporate Debtor. 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. Application under Section 7 of the Insolvency & Bankruptcy Code, 2016. 2. Existence of financial debt and default by the Corporate Debtor. 3. Appointment of Interim Resolution Professional (IRP). 4. Declaration of moratorium under Section 14 of the I&B Code, 2016. 5. Objections raised by the Corporate Debtor. Issue-wise Detailed Analysis: 1. Application under Section 7 of the Insolvency & Bankruptcy Code, 2016: The Financial Creditor, Tourism Finance Corporation of India Limited, filed an application under Section 7 of the Insolvency & Bankruptcy Code, 2016, read with Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, against the Corporate Debtor, M/s. Appu Hotels Limited. The application sought the initiation of the Corporate Insolvency Resolution Process (CIRP), declaration of moratorium, and appointment of an Interim Resolution Professional (IRP). 2. Existence of financial debt and default by the Corporate Debtor: The application detailed the financial debt amounting to ?17,87,09,463/- with further interest from 30.11.2019. The debt was supported by various documents, including sanction letters, loan agreements, deeds of personal guarantee, and agreements for the pledge of shares. The Financial Creditor argued that the Corporate Debtor, engaged in the hotel business, faced liquidity constraints and defaulted on its obligations, leading to the restructuring of loans under the RBI's 5/25 Scheme. Despite efforts to sell non-core assets and negotiate with buyers, the Corporate Debtor failed to repay the dues, resulting in the account being declared as NPA on 30.09.2019. 3. Appointment of Interim Resolution Professional (IRP): The Financial Creditor proposed Mukesh Kumar Gupta as the Interim Resolution Professional (IRP), with the necessary written communication filed in the prescribed format. The Tribunal appointed him as the IRP to take forward the CIRP process, superseding the powers of the Board of Directors of the Corporate Debtor as per the provisions of the I&B Code, 2016. 4. Declaration of moratorium under Section 14 of the I&B Code, 2016: Upon admitting the application, the Tribunal declared a moratorium under Section 14(1) of the I&B Code, 2016. The moratorium included: (a) The institution or continuation of suits or proceedings against the Corporate Debtor. (b) Transferring or disposing of any assets or legal rights by the Corporate Debtor. (c) Actions to foreclose or enforce any security interest. (d) Recovery of property by an owner or lessor. The moratorium would remain in effect until the completion of the CIRP or until an approval of the resolution plan or liquidation order by the Adjudicating Authority. 5. Objections raised by the Corporate Debtor: The Corporate Debtor, engaged in the hotel business for three decades, argued that it employed around 800 people and had availed loans for business expansion by mortgaging properties worth ?1000 Crores. The Corporate Debtor claimed to have serviced the loan regularly until September 2019 but faced difficulties due to the economic slowdown and delays in selling the land. Despite efforts to sell the land and negotiate with buyers, the transactions did not materialize. The Corporate Debtor expressed willingness to settle the dues and cooperate with the Financial Creditor for OTS negotiations, arguing that allowing the application would cause irreparable loss. Conclusion: After hearing both parties and reviewing the documents, the Tribunal concluded that the Corporate Debtor was unable to repay its dues, and there was a clear default. Citing precedents from the Hon'ble Supreme Court, the Tribunal emphasized that in cases of financial debt and default, it is bound to admit the application under Section 7 and initiate the CIRP. Consequently, the Tribunal admitted the application, declared a moratorium, and appointed Mukesh Kumar Gupta as the IRP, directing him to take necessary steps as per the statute and file a report within 20 days. The order was to be communicated to the relevant parties and authorities.
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