2021 (9) TMI 492 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of its debt and dispute or not - HELD THAT - On perusal of the material papers on record and in terms of extant provisions of Section 7 of IBC, the debt due to the Financial Creditor is proved. The Adjudicating Authority admits the Petition under Section 7 of the Code, declaring the moratorium for the purposes referred to in Section 14 of the Code - Petition admitted - moratorium declared.

Summary

Issues:
1. Admission of petition under Section 7 of Insolvency and Bankruptcy Code, 2016.
2. Default by the Corporate Debtor in repayment of a loan.
3. Arguments regarding financial problems faced by the Corporate Debtor.
4. Consideration of the petition by the Adjudicating Authority.
5. Decision on admitting the petition and granting moratorium.

Analysis:

The case involved a petition filed by a Financial Creditor against a Corporate Debtor under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking admission of the petition and initiation of Corporate Insolvency Resolution Process (CIRP). The Financial Creditor alleged that the Corporate Debtor had defaulted in repaying a substantial amount. The Corporate Debtor had availed a loan and failed to fulfill the repayment obligations, leading to the petition being filed. The Financial Creditor provided detailed facts regarding the loan agreement, default in payments, and the total amount due, including principal and interest components.

In response, the Corporate Debtor cited financial difficulties, particularly exacerbated by the global pandemic, as reasons for the payment default. The Corporate Debtor requested additional time to repay the amount claimed by the Financial Creditor. Additionally, arguments were presented regarding the maximization of the Corporate Debtor's asset value, the maintainability of the petition due to limitation, and the impact of the pandemic on the Corporate Debtor's financial situation.

After hearing arguments from both parties, the Adjudicating Authority found that the debt due to the Financial Creditor was proven in accordance with Section 7 of the Insolvency and Bankruptcy Code. Considering all relevant factors, the Authority decided to admit the petition against the Corporate Debtor. Consequently, the Authority declared a moratorium under Section 14 of the Code and issued specific directions to safeguard the interests of all parties involved. These directions included prohibitions on legal actions against the Corporate Debtor, appointment of an Interim Resolution Professional, and ensuring continuity of essential goods or services to the Corporate Debtor during the moratorium period.

The Authority also outlined the effect of the moratorium order until the completion of the Corporate Insolvency Resolution Process or approval of a Resolution Plan. Furthermore, the Authority directed the immediate public announcement of the Corporate Insolvency Resolution Process and instructed the Registry to update the status of the Corporate Debtor accordingly. Ultimately, the petition was admitted, and necessary actions were taken to proceed with the resolution process in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016.