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2021 (5) TMI 178 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - On perusal of documents, it appears that 'debt' and 'default' are proved. In the counter filed by the Corporate Debtor on 05.03.2021, it was specifically admitted to sanction the credit facilities and also to the outstanding under the loan accounts in para 9 and 10 of their counter. Thereafter, the Corporate Debtor filed Additional Counter during February 2021 in which default in the loan account was categorically admitted. The grounds as raised by the Applicant in the present IA/167(CHE)/2021 and IA/168(CHE)/2021 do not hold much, since the affidavit not having been notarized is only a procedural irregularity and it is a curable defect. This irregularity can be rectified by the Applicant at any point of time. It is also pertinent to note here that the proviso to Section 7(5) of IBC, 2016 states that this Adjudicating Authority before rejecting the application under sub-clause (b) of sub-section (5) of Section 7 of IBC, 2016 shall give a notice to the Applicant to rectify the defect in the application - the Financial Creditor has proved existence of 'debt' and 'default', with respect to outstanding due against the Corporate Debtor. Therefore, this Insolvency and Bankruptcy Application stands admitted. Application admitted - moratorium declared.
Issues: Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process (CIRP) against a Corporate Debtor due to default in repayment.
Detailed Analysis: 1. The Financial Creditor filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor for defaulting on repayment of an amount exceeding ?18 crores. The Corporate Debtor had availed credit facilities from the Financial Creditor, which were defaulted upon, leading to the classification of the account as a Non-Performing Asset (NPA). 2. The Corporate Debtor argued that its assets exceeded liabilities and that the default in payment should not warrant insolvency proceedings. The Corporate Debtor claimed to have valuable assets and plans to revive its business successfully, attributing temporary financial troubles to government policies. Additionally, the Corporate Debtor mentioned efforts to raise funds and settle the outstanding loan with the Financial Creditor. 3. The Financial Creditor contended that the Corporate Debtor admitted to the default in the loan account and had not fulfilled repayment obligations. The Financial Creditor also highlighted the issuance of a demand notice under the SARFAESI Act and subsequent payments made by the Corporate Debtor, leading to the outstanding amount at the time of application. 4. The Tribunal considered two additional applications filed by the Corporate Debtor, challenging the main application. The first application sought to exclude certain documents due to deficiencies in accompanying affidavits, while the second application requested the dismissal of the main application based on the repayment made by the Corporate Debtor, which the Corporate Debtor argued was sufficient to cover outstanding installments. 5. The Tribunal ruled that the procedural irregularity regarding the affidavit could be rectified and did not warrant dismissal of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Tribunal found that the Financial Creditor had established the existence of debt and default, leading to the admission of the insolvency application and the appointment of an Interim Resolution Professional. 6. Consequently, the Tribunal admitted the insolvency application, dismissed the challenges raised by the Corporate Debtor, and directed the communication of the order to the parties involved and the appointed Interim Resolution Professional. The order included provisions for a moratorium period, appointment of the Interim Resolution Professional, and other necessary directions for the insolvency resolution process.
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