2021 (11) TMI 471 - Tri - Insolvency and Bankruptcy

Maintainability 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 - The Corporate Debtor has accepted its liability to pay to the Financial Creditor in its reply dated 07.11.2020. The Corporate Debtor has not disputed the loan disbursed and has expressed its inability to pay to the Financial Creditor due to insufficiency of funds. There is no dispute as to loan amount disbursed by the Financial Creditor to the Corporate Debtor. Due to persistent failure on the part of the Corporate Debtor to repay the loan, the Financial Creditor vide letters dated 15.11.2017, 01.12.2017 and 20.12.2017 requested the Corporate Debtor to refund the interest amount - The Financial Creditor has attached copy of Balance sheet of the Corporate Debtor for the Financial Year 2014-2015 which reflects the debt payable to the Financial Creditor. The Financial Creditor has also attached the MOU dated 24.02.2014 and the 2nd MOU dated 19.02.2016 executed between the Financial Creditor and the Corporate Debtor which shows that the amount of loan was disbursed and the Corporate Debtor was also liable to pay an interest on the said loan @ 18% p.a. The nature of Debt is a Financial Debt as defined under section 5 (8) of the Code. It has also been established that there is a Default as defined under section 3(12) of the Code on the part of the Debtor. The two essential ingredients, i.e. existence of 'debt' and 'default', for admission of a petition under section 7 of the I B Code, have been met in this case - it is found that the Financial Creditor has not received the outstanding Debt from the Corporate Debtor and that the formalities as prescribed under the Code have been completed by the Petitioner. This Petition deserves 'Admission'. Petition admitted - moratorium declared.

Summary

Issues involved:
- Admission of petition under Section 7 of the Insolvency and Bankruptcy Code
- Default in repayment of loan by the Corporate Debtor
- Appointment of Interim Resolution Professional
- Implementation of Moratorium under Section 14 of the Code
- Public Announcement of the Initiation of Corporate Insolvency Resolution Process
- Duties of the Interim Resolution Professional

Admission of petition under Section 7 of the Insolvency and Bankruptcy Code:
The Financial Creditor, a bank, filed a petition against the Corporate Debtor, a construction and development company, invoking Section 7 of the Insolvency and Bankruptcy Code due to default in repayment of a loan. The Financial Creditor provided substantial evidence of the loan disbursement, default, and the Corporate Debtor's failure to repay. The Tribunal found that the debt and default criteria for admission of the petition were met, leading to the admission of the petition.

Default in repayment of loan by the Corporate Debtor:
The Corporate Debtor acknowledged its liability to repay the Financial Creditor but cited financial difficulties due to a recession in the real estate industry. Despite repeated reminders and requests for repayment, the Corporate Debtor failed to refund the loan amount. The Tribunal noted the Corporate Debtor's admission of the debt and default, leading to the conclusion that the petition deserved admission.

Appointment of Interim Resolution Professional:
The Tribunal appointed an Interim Resolution Professional (IRP) to conduct the insolvency resolution process. The proposed IRP, Mr. Kedar Parshuram Mulye, was appointed based on the written consent provided by the Financial Creditor. The IRP's role includes overseeing the resolution process and ensuring compliance with the Code's provisions.

Implementation of Moratorium under Section 14 of the Code:
Upon admission of the petition, the Tribunal declared a moratorium under Section 14 of the Code. This moratorium prohibits legal actions against the Corporate Debtor, asset transfers, or termination of essential services. It remains effective until the completion of the insolvency resolution process or approval of a resolution plan.

Public Announcement of the Initiation of Corporate Insolvency Resolution Process:
Following the appointment of the IRP, the next step involves the public announcement of the initiation of the Corporate Insolvency Resolution Process. This announcement is a mandatory step as per the provisions of the Code and must be carried out promptly by the IRP.

Duties of the Interim Resolution Professional:
The IRP is tasked with performing duties as assigned under Sections 18 and 15 of the Code. These duties include informing the Tribunal about the progress of the resolution plan and compliance with the Tribunal's directions within 30 days. The IRP is granted liberty to provide updates earlier if necessary.

In conclusion, the Tribunal admitted the petition, appointed an IRP, implemented a moratorium, and directed the IRP to carry out necessary steps for the Corporate Insolvency Resolution Process. The decision aimed to address the default in loan repayment and facilitate the resolution of the financial issues between the Financial Creditor and the Corporate Debtor.