2021 (3) TMI 550 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its Financial Debt - existence of debt and dispute or not - HELD THAT - It is observed that the applicant has failed to produce any document or agreement entered into between the parties regarding the debt which the applicant claim to have deposited in the account of the respondents. Further the applicant also has not filed any documents to prove as to what was agreed term of interest, which the applicant are entitled to get in case of default of payment. This Adjudicating Authority is of the view that as the applicants failed to produce any document to show that the applicant has given the money to the corporate debtor as it was contended that the amount was transferred to the personal account of the intermediary as well as the personal account of the directors and failed to establish that the amount was given to the corporate debtor. Therefore, the case of the applicant does not comes under any of the provision section 5(8)(a) to (i) of the I and B Code, thus cannot be considered as financial debt and neither the applicant comes under the definition of the financial creditor in view of section 5(7) of the IB Code. This Adjudicating Authority is of the considered view that in absence of any document or agreement, the contention of the applicant is not liable to be accepted and the applicants failed to prove that the amount deposited comes under the definition of financial debt under section 5(8) of the IBC - This Adjudicating Authority is of the opinion that the applicant failed to bring on record the default recorded with the information utility or such other record or evidence as may be specified which is necessary to proceed for admitting the petition under section 7 of the I and B Code. The prayer to initiate proceedings under section 7 of the IBC against the Tripathi Hospital P. Ltd. is hereby rejected and the application stands dismissed.

Issues:
Initiation of corporate insolvency resolution process under section 7 of the Insolvency and Bankruptcy Code, 2016 based on financial debt default.

Detailed Analysis:
1. The financial creditor filed a petition under section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of the corporate insolvency resolution process against the corporate debtor, "Tripathi Hospital P. Ltd.," due to its failure to repay financial debt.

2. The petitioner claimed to have provided loans to the corporate debtor for hospital construction based on requests from the directors and an intermediary, transferring significant amounts to their accounts for the project's development.

3. The petitioner, a retired Armed Forces officer, alleged that post-retirement dues were utilized as loans for the hospital project, leading to the initiation of the insolvency resolution process.

4. Despite transferring substantial sums to the directors and intermediary for the hospital project, the corporate debtor faced financial difficulties, failed to repay the loans, and expressed inability to meet monthly interest payments, promising repayment by a specific date.

5. Efforts to recover the loan amount, including requests for repayment for personal reasons like a daughter's marriage, were unsuccessful, leading to legal actions and non-compliance by the respondents.

6. The respondent's defense contended that the transferred amounts were not legally payable debts as there was no formal agreement or contract for repayment, challenging the petitioner's status as a financial creditor under the Insolvency and Bankruptcy Code.

7. The tribunal emphasized the necessity for establishing three key elements for initiating insolvency proceedings under section 7: existence of a financial debt, default in payment by the corporate debtor, and submission of relevant documents for resolution professional appointment.

8. The tribunal noted the absence of documented evidence or agreements regarding the alleged debt, questioning the nature of the funds transferred and the terms of interest for potential defaults.

9. The definition of "financial debt" under section 5(8) of the Insolvency and Bankruptcy Code was scrutinized to determine if the petitioner's claims aligned with the criteria, emphasizing the importance of demonstrating the consideration for the time value of money.

10. The tribunal concluded that the petitioner failed to substantiate the financial debt claim with sufficient documentation or proof, leading to the dismissal of the application for insolvency resolution against the corporate debtor.

11. While acknowledging the petitioner's grievances, the tribunal advised seeking alternative legal remedies for redressal, highlighting the importance of adhering to legal provisions and evidentiary requirements in insolvency proceedings.

12. Ultimately, the tribunal rejected the application for initiating insolvency proceedings under section 7 of the Insolvency and Bankruptcy Code against "Tripathi Hospital P. Ltd.," citing the lack of evidence and compliance with legal provisions as grounds for dismissal.

← Previous Next →