2021 (12) TMI 1237 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial contract - financial creditors - existence of debt and dispute or not - HELD THAT - It is well settled now, for an Application under Section 7 of IBC, 2016 to be admitted by the Adjudicating Authority, (i) there must be a debt and (ii) the said debt must be due and payable either in law or on facts and (iii) the said debt should partake the character of a 'Financial Debt' and (iv) upon non-payment of the said 'debt' would amount to default. Only if the above conditions are satisfied then this Adjudicating Authority can admit an Application filed by the Financial Creditor under Section 7 of IBC, 2016. It becomes clear that it is incumbent upon the Financial Creditor while filing this petition to place on record before this Authority, the 'Financial Contract' and demonstrate without any ambiguity from the financial contract, the amount disbursed as per the loan/debt, the tenure of the loan/debt, the interest payable and the conditions of repayment - the Applicant herein failed to demonstrate that the 'debt' has become due and payable and there's default, due to the lack of a 'Financial contract' in consonance to the present case and as such the Applicant does not qualify to be the Financial Creditor in relation to the Corporate Debtor. Application dismissed.

Summary

Issues:
Application under Section 7 of the Insolvency & Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process (CIRP) against a Private Limited Company.

Analysis:
The Application was filed under Section 7 of the IBC, 2016 by the Financial Creditor against the Corporate Debtor, a Private Limited Company. The Application detailed the Corporate Debtor's particulars, including its incorporation details and share capital. The Financial Creditor proposed an Interim Resolution Professional and claimed an amount inclusive of interest as in default, providing various documents to support the debt claim.

The Adjudicating Authority heard both parties and questioned the existence of a financial contract supporting the debt claim. It was emphasized that for an Application under Section 7 of the IBC to be admitted, specific conditions must be met, including the debt being due and payable, characterizing as a financial debt, and constituting a default upon non-payment.

The Application was filed in accordance with Rule 4 of the IBBI Rules, accompanied by necessary documents. Regulation 8 of the IBBI Regulations outlined the requirements for claims by financial creditors, emphasizing the need for proof of debt based on financial contracts or other relevant documents. The definition of a financial contract was also highlighted, stressing the importance of demonstrating key terms such as the amount disbursed, tenure, interest payable, and repayment conditions.

A reference was made to a previous decision by the NCLAT, emphasizing the significance of a financial contract in determining the nature of a transaction as a financial debt. Ultimately, the Tribunal found that the Applicant failed to demonstrate the debt's due and payable status and the existence of a financial contract, leading to the dismissal of the Application. Consequently, the Application was dismissed, and the Applicant did not qualify as a Financial Creditor in relation to the Corporate Debtor.