2021 (4) TMI 298 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Dues - existence of debt and dispute or not - HELD THAT - The Financial Creditor has proved existence of debt and default and there being no denial from the Corporate Debtor with respect to outstanding due against the Corporate Debtor, the application stands admitted - Petition is admitted - moratorium declared.

Summary

Issues:
Application under Section 7 of the Insolvency and Bankruptcy Code for initiation of Corporate Insolvency Resolution Process due to default in repayment by the Corporate Debtor.

Analysis:
The Financial Creditor filed an application under Section 7 of the Insolvency and Bankruptcy Code against the Corporate Debtor, citing a default in repaying an amount of ?8,19,21,359.06 along with interest on a working capital term loan. The Applicant had sanctioned a loan repayable on demand with floating interest, and the Corporate Debtor had availed the loan by hypothecating movable properties and providing personal guarantees. The Corporate Debtor defaulted on repayment, leading to the account being classified as a Non-Performing Asset under the SARFAESI Act, 2002. Despite partial payments during proceedings, a significant balance remained outstanding.

The Corporate Debtor, in response, claimed to have reduced the liability by selling company assets and accused the Applicant of holding funds in suspense without proper credit. The Corporate Debtor asserted its ability to honor commitments by selling assets and continuing business operations.

Upon reviewing the evidence, the Tribunal found the existence of debt and default, with no denial from the Corporate Debtor regarding the outstanding dues. The application was admitted, appointing an Interim Resolution Professional and declaring a moratorium to protect the Corporate Debtor from legal actions and asset disposals. Essential supplies to the Corporate Debtor were to continue uninterrupted during the moratorium period. The order of moratorium was to remain in effect until the completion of the insolvency resolution process or liquidation, with public announcements and communication to relevant parties directed accordingly.

In conclusion, the Tribunal admitted the petition, appointed the Interim Resolution Professional, and imposed a moratorium to facilitate the resolution process while safeguarding the Corporate Debtor's assets and operations.