2022 (1) TMI 712 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor committed default in making payment to the Financial Creditor in view of the term loan and working capital facilities availed by them - Financial Creditors - existence of debt and dispute or not - HELD THAT - The counsel for the Financial Creditor submits that since the debt is admitted, the defences taken by the Corporate Debtor cannot be appreciated. The counsel for the Corporate Debtor also does not raise any serious argument against the said contention. He only makes an attempt to submit that the inability to pay was due to the pandemic and due to the incidents mentioned in the counter. When debt is admitted, the reasons for the inability to pay, cannot help the Corporate Debtor however valid they are. It is for the Corporate Debtor to settle the matter with Financial Creditor. As it failed to do so, the Petition made to be allowed. It is a fit case to admit and order initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - Petition admitted - moratorium declared.

Issues Involved:
Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 due to default in payment by the Corporate Debtor to the Financial Creditor.

Detailed Analysis:

1. Background and Default Allegation:
The Financial Creditor, a Private Limited Company, sought initiation of CIRP against the Corporate Debtor, alleging default in payment of a substantial amount, including principal and interest, as per credit facilities availed. The Corporate Debtor, also a Private Limited Company, had availed financial assistance from the Financial Creditor, leading to the outstanding amount.

2. Financial Transaction Details:
The Financial Creditor sanctioned credit facilities amounting to ?17,45,90,000 to the Corporate Debtor, who executed a loan agreement in favor of the Financial Creditor. The Corporate Debtor's total outstanding amount, including interest, was ?20,21,15,159 as of March 31, 2021.

3. Counterclaim by the Corporate Debtor:
The Corporate Debtor admitted to the loan agreement but cited reasons for the inability to pay, including a penalty imposed for failure to pay excise duty. The Corporate Debtor's goods were damaged, leading to an insurance claim, further complicated by the Covid-19 pandemic.

4. Legal Arguments and Decision:
Both parties presented their arguments, with the Financial Creditor emphasizing the admitted debt and the Corporate Debtor's failure to settle the outstanding amount. The Tribunal noted that despite valid reasons for non-payment, the admitted debt required resolution between the parties. Consequently, the Tribunal found it appropriate to admit the petition and initiate CIRP against the Corporate Debtor.

5. Judgment and Appointments:
The Tribunal admitted the Company Petition, commencing the Corporate Insolvency Resolution Process against the Corporate Debtor. Mr. Maligi Madhusudhana Reddy was appointed as the Interim Resolution Professional to manage the Corporate Debtor's affairs during the CIRP. The Tribunal declared a moratorium under Section 14 of the Code, directing cooperation from the Directors, Promoters, and associated individuals with the Corporate Debtor.

6. Further Directives and Compliance:
The Tribunal directed the IRP to undertake necessary steps for the CIRP as per the relevant sections and rules. It also mandated the Financial Creditor, Corporate Debtor, and Registry to comply with the order promptly, ensuring effective implementation of the CIRP process within the stipulated timeline.

This detailed analysis encapsulates the key legal and procedural aspects of the judgment delivered by the National Company Law Tribunal, Amaravati Bench, regarding the initiation of Corporate Insolvency Resolution Process based on the default in payment by the Corporate Debtor to the Financial Creditor.

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