2021 (8) TMI 63 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - adjudication of quantum of the liability - scope of enquiry in an application under Section 7 of I B code - existence of debt and dispute or not - HELD THAT - The loan facilities were restructured in the year 2015 after consolidation of the accounts and accordingly, the Corporate Debtor executed all necessary loan documents in favour of the consortium of banks in pursuance of restructuring of the loan facilities. It is very surprising that after restructuring of the facilities and execution of the documents, and after committing default, the Corporate Debtor started demanding calculation and statement of accounts down from the year 2003 which is not legally permissible. Even otherwise adjudication of quantum of the liability is beyond the scope of enquiry in an application under Section 7 of the code. It is not the case of the Corporate Debtor that there was no debt or default in this case. Apart from that the Corporate Debtor also gave an OTS offer of repayment of 4 crores as full and final settlement vide their reply notice sent through their advocate without prejudice to their rights and contentions. Therefore, it is very clear from the above feeble contest raised by the Corporate Debtor that the debt and default are clearly established in this case and there is no merit in the contention raised by the Corporate Debtor. There are no valid grounds warranting the rejection of the above Company Petition as the debt and default are clearly established and the debt is also within limitation. The present petition is complete in all respects - petition admitted - moratorium declared.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.
2. Alleged default by the Corporate Debtor in making payments to the Financial Creditor.
3. Discrepancies and contradictions in the amounts claimed by the Financial Creditor.
4. Failure of the Financial Creditor to provide inspection of loan accounts and documents.
5. Determination of debt and default under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor:
The Financial Creditor, Jalgaon Janata Sahakari Bank Limited, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate CIRP against the Corporate Debtor, Desimran Cartons Private Limited, for defaulting on a payment of ?17,53,80,008. The petition was supported by various loan documents, restructuring agreements, and acknowledgments of debt executed between the parties.

2. Alleged default by the Corporate Debtor in making payments to the Financial Creditor:
The Financial Creditor argued that the Corporate Debtor had availed various loan facilities since 2003, which were restructured in 2015. Despite the restructuring, the Corporate Debtor defaulted on repayments. The last payments towards the term loan and cash credit facilities were made on 02.05.2017 and 11.11.2016, respectively. The Financial Creditor issued a legal notice on 14.12.2018, to which the Corporate Debtor responded on 19.03.2019, disputing the claimed amounts.

3. Discrepancies and contradictions in the amounts claimed by the Financial Creditor:
The Corporate Debtor contended that there were inconsistencies in the amounts mentioned in the petition, annexures, and the notice under Section 101 of the Maharashtra Co-operative Societies Act. These inconsistencies made it difficult for the Corporate Debtor to ascertain the actual amount claimed by the Financial Creditor. The Corporate Debtor also claimed to have repaid approximately ?22,00,00,000 to the Financial Creditor, disputing the outstanding amount of ?25,00,00,000.

4. Failure of the Financial Creditor to provide inspection of loan accounts and documents:
The Corporate Debtor argued that the Financial Creditor failed to provide inspection of the loan accounts and documents from the inception of the loan in 2002-2003. Despite multiple requests and a tribunal order dated 11.09.2019, the Financial Creditor did not furnish the required documents, leading to allegations of fraud and extortion by the Corporate Debtor.

5. Determination of debt and default under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The tribunal examined the arguments and evidence presented by both parties. It noted that the loan facilities were restructured in 2015, and the Corporate Debtor executed necessary loan documents. The tribunal found that the Corporate Debtor's demand for account statements from 2003 was not legally permissible, and the adjudication of the quantum of liability was beyond the scope of Section 7 proceedings. The tribunal observed that the Corporate Debtor had acknowledged the debt and default by offering a one-time settlement of ?4 crores. Consequently, the tribunal concluded that the debt and default were clearly established.

Order:
The tribunal admitted the petition and ordered the initiation of CIRP against the Corporate Debtor. Mr. Vivek Murlidhar Dabhade was appointed as the Interim Resolution Professional (IRP). The tribunal directed the Financial Creditor to deposit ?5 lakhs towards initial CIRP costs and imposed a moratorium on suits, asset transfers, and other actions against the Corporate Debtor. The tribunal also instructed the IRP to make a public announcement of the CIRP and vested the management of the Corporate Debtor in the IRP.

Conclusion:
The tribunal found the petition complete and the debt and default established, thereby admitting the petition and initiating CIRP against the Corporate Debtor.

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