2021 (5) TMI 426 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Corporate Debtor (CD) is corporate guarantor of two principal borrowers - Financial Creditors - existence of debt and dispute or not - HELD THAT - If it is established that default has occurred and no disciplinary proceeding is pending against the IRP and application is complete, the Adjudicating Authority (AA) has no option but to admit the application; if any of the conditions is lacking, the application is liable to be rejected. The applicant falls within the definition of Financial Creditor. The material placed on record further confirms that FC had disbursed loan facilities to the principal borrowers in respect of which guarantees were issued by the CD. The principal borrowers had committed default in repayment of the outstanding financial debt. The FC has placed on record the guarantee agreement (tripartite agreement) executed by CD in favour of FC. The present application is complete in all respects and the FC is entitled to claim outstanding financial debts from the CD and that there has been default in payment of the financial debt - Petition admitted - moratorium declared.

Summary

Issues:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 for triggering Corporate Insolvency Resolution Process (CIRP).
2. Determination of financial debt and default by the Corporate Debtor.
3. Appointment of Interim Resolution Professional (IRP) and initiation of CIRP.
4. Declaration of moratorium and its implications.
5. Duties and obligations of the IRP and Financial Creditor during the CIRP process.

Analysis:

1. The Corporation Bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against DMC Infrastructure Pvt. Ltd., the Corporate Debtor, as a corporate guarantor for two principal borrowers, Roshini Jewellers Pvt. Ltd. and J.B. Gold Pvt. Ltd. The debt amount due was &8377; 22.85 crore as of a specific date.

2. The Corporation Bank, a body corporate under the Banking Companies Act, 1980, with its Head Office in Karnataka, sought CIRP against DMC Infrastructure Pvt. Ltd., incorporated in 2008 in Delhi, as the corporate guarantor of the two borrowers.

3. The application detailed the default by the principal borrowers, the issuance of notices under the SARFAESI Act, and subsequent legal actions taken by the Bank, leading to the application against the Corporate Debtor. The Bank provided evidence of financial debt and default as required under the Code.

4. The Tribunal found that the Bank met the definition of a Financial Creditor under the Code, having disbursed loan facilities to the principal borrowers against guarantees issued by the Corporate Debtor. The application was deemed complete, and the outstanding financial debt was confirmed, justifying the admission of the petition and initiation of CIRP.

5. Following the satisfaction of the conditions under the Code, the Tribunal admitted the application, appointed an Interim Resolution Professional (IRP), declared a moratorium, and directed the IRP to perform duties as per the Code. The Tribunal emphasized the obligations of the IRP, the Financial Creditor, and the stakeholders during the CIRP process.

6. The Tribunal imposed prohibitions under the moratorium, ensuring protection of the Corporate Debtor's assets and interests while allowing essential services to continue. The Tribunal also directed the Financial Creditor to deposit a fee for the IRP's immediate expenses, to be reimbursed by the Committee of Creditors during the CIRP.

7. The Tribunal ordered communication of the decision to all relevant parties promptly, emphasizing compliance with the Code's provisions and regulations throughout the insolvency resolution process.

This detailed analysis of the judgment provides a comprehensive understanding of the legal proceedings and decisions made by the National Company Law Tribunal in the case.