2022 (2) TMI 834 - 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 - An application under Section 7 of the Code is acceptable so long as the debt is proved to be due and there has been occurrence or existence of default. What is material is that the default is for at least ₹ 1 Lakh. In view of Section 4 of the Code, the moment default is of Rupees one lakh or more, the application to trigger Corporate Insolvency Resolution Process under the Code is maintainable. The corporate debtor has failed to show that there is no debt or default in existence so as to avoid the provisions of the Code. In the facts it is seen that the applicant clearly comes within the definition of Financial Creditor. The material placed on record further confirms that respondent has committed default in repayment of the outstanding financial debt. On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same, he evidence produced by the applicant company remained un-rebutted - the present application is complete in all respect and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been default in payment of the financial debt. In terms of Section 7(5)(a) of the Code, the present application is admitted - Moratorium declared.

Summary

Issues:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process.
2. Proof of debt and default by the respondent company.
3. Appointment of Interim Resolution Professional.
4. Declaration of moratorium and its implications.

Issue 1: Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process:
The application was filed by Volkswagen Finance Pvt. Ltd. seeking initiation of insolvency resolution process against M/s. Evo Green Trading Pvt. Ltd., the respondent company, under Section 7 of the Code. The applicant established itself as a financial creditor with a claim of ?1,00,00,500.00 due and payable by the respondent. The Tribunal found the application to be complete and admitted it under Section 7(5)(a) of the Code.

Issue 2: Proof of debt and default by the respondent company:
The respondent company failed to appear despite service, leading to an ex-parte order. The Tribunal emphasized the necessity of proving the debt and default for a valid application under Section 7 of the Code. It was established that the applicant was a financial creditor and the respondent had defaulted in repayment, justifying the initiation of insolvency proceedings.

Issue 3: Appointment of Interim Resolution Professional:
In compliance with Section 7(3)(b) of the Code, the applicant proposed Mr. Kamal Agarwal as the Interim Resolution Professional. Mr. Agarwal's acceptance and compliance with regulatory requirements were confirmed, leading to his appointment. The Tribunal directed the public announcement of the admission of the application and required the financial creditor to deposit ?2 Lakhs with the Interim Resolution Professional for necessary expenses.

Issue 4: Declaration of moratorium and its implications:
A moratorium was declared under Section 14 of the Code, imposing restrictions on legal actions against the corporate debtor and asset transfers. Exceptions to the moratorium were specified, including essential goods or services supply. The Interim Resolution Professional was tasked with managing the affairs of the corporate debtor diligently, with obligations to protect its property value and seek cooperation from relevant parties. Communication of the order to involved parties was mandated within seven days.

This judgment highlights the procedural adherence and legal requirements for initiating insolvency proceedings, emphasizing the need for proof of debt and default, appointment of qualified professionals, and the implications of declaring a moratorium to facilitate the resolution process effectively.