2022 (3) TMI 512 - AT - 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 - service of demand notice - HELD THAT - In the present case the Corporate Debtor had not paid any instalment and pursuant to the terms of the One-time Settlement and in fact the One time Settlement which was sanctioned earlier got annulled. In fact the 1st Respondent/Financial Creditor/Bank projected the MA/61/2020 before the Debt Recovery Tribunal bringing to its notice in spite of the fact that the Debtor had failed to adhere to the terms of One-time Settlement and Joint Compromise Memo and hence relief was sought from the Debt Recovery Tribunal to pass an order for the same claimed in Original Application . In the present case it cannot be brushed aside that the balance amount standing as on date 31.03.2020 was at 197.96 Crores and in view of the fact that the One Time Settlement was cancelled through the Letter of the Bank and because of the fact that in the Audited Balance Sheet in respect of the Financial Year 2019-20 the Corporate Debtor himself had proceeded to make a relevant mention among other things that the Company has entered into One Time Settlement dated 01.08.2019 with the State Bank of India to settle the outstanding SBI Loan (NPA) and interest due with One Time Payment of 112.00 Crores cash margin of BG Outstanding to 2.7 Crores to be paid before 31st January 2020. If the Adjudicating Authority is subjectively satisfied that there was Debt due and payable in law and in fact by the Corporate Debtor to in favour of the 1st Respondent/Bank/Financial Creditor then in law the Adjudicating Authority is left with no other alternative but to admit the application under the I B Code 2016. On going through the Impugned Order passed by the Adjudicating Authority (National Company Law Tribunal Hyderabad Bench Hyderabad) is of the earnest opinion that the Adjudicating Authority was right in admitting the Application under Section 7 of the Code filed by the 1st Respondent/Bank and the said order is free from any legal infirmities - Appeal dismissed.

Summary

Issues:
Admission of CP/IB/206/2021 by the Adjudicating Authority under Section 7 of the I&B Code, 2016.
Service of notice to the Appellant and change of registered address of the 2nd Respondent.
Default in repayment by the Corporate Debtor to the Financial Creditor.
Validity of the Impugned Order admitting the Application under Section 7 of the Code.

Analysis:
The Adjudicating Authority admitted CP/IB/206/2021 under Section 7 of the I&B Code, 2016 based on evidence of financial debt and default by the Corporate Debtor towards the Financial Creditor. The Authority found the Financial Creditor had fulfilled all stipulations required for initiating the Corporate Insolvency Resolution Process. The Tribunal upheld the Authority's decision, emphasizing the need for the Applicant to establish the debt default for admission under the Code.

The Appellant raised concerns about not receiving the notice and the change in the 2nd Respondent's registered address. The Appellant argued that insufficient notice prejudiced their defense in the Company Petition. However, the Tribunal noted the Appellant's contentions but did not find them sufficient to overturn the Adjudicating Authority's decision.

The Financial Creditor demonstrated that the Corporate Debtor defaulted in repaying the loan sum, leading to the initiation of the insolvency process. The Financial Creditor had previously filed an Original Application for recovery, and despite settlement attempts, the Corporate Debtor failed to adhere to the terms, resulting in the cancellation of the settlement. The Adjudicating Authority's decision to admit the Application under Section 7 was deemed legally sound and free from infirmities.

In conclusion, the Tribunal dismissed the Company Appeal AT CH INS No.66 of 2022, stating it lacked merit. The Tribunal upheld the Adjudicating Authority's decision to admit the Application under Section 7 of the Code, emphasizing the importance of establishing debt default for such admissions. The Tribunal closed the related Interlocutory Applications without costs.