2022 (5) TMI 79 - 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 is liable to pay the Petitioner and defaulted in making the payment to the Petitioner. Considering the facts, it is concluded that 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 qualifications, 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. Besides, the Company Petition is well within the period of limitation. The formalities as prescribed under the Code have been completed by the Petitioner, and therefore this Petition deserves 'Admission'. Petition admitted - moratorium declared.

Issues:
1. Admission of petition under Section 7 of the Insolvency and Bankruptcy Code.
2. Determination of debt and default.
3. Appointment of Interim Resolution Professional.
4. Implementation of Moratorium under Section 14 of the Code.
5. Public Announcement of Corporate Insolvency Resolution Process.
6. Duties of the Interim Resolution Professional.

Analysis:
1. The Petitioner, a banking company, invoked Section 7 of the Insolvency and Bankruptcy Code against the Corporate Debtor for defaulting on a financial debt of Rs. 8,53,87,717/- with interest. The Petitioner provided credit facilities to the Corporate Debtor, which were not repaid, leading to the admission of the petition due to established debt and default. The nature of the debt falls under the definition of "Financial Debt" as per the Code, meeting the criteria for admission within the limitation period.

2. The Corporate Debtor failed to repay the debt despite various renewals and amendments to credit facilities. The Petitioner submitted evidence of default, including bounced cheques and non-response to recall notices. The Corporate Debtor admitted liability, confirming the debt and default. The Tribunal found the Corporate Debtor liable for the outstanding amount, justifying the admission of the petition under Section 7 of the Code.

3. The Tribunal appointed an Interim Resolution Professional (IRP) proposed by the Financial Creditor to conduct the Insolvency Resolution Process. The appointed IRP, Mr. Sanjeev Kumar Jalan, met the necessary qualifications and had no pending disciplinary actions. The IRP's responsibilities include overseeing the resolution process and complying with the directions of the Tribunal, ensuring transparency and progress reporting within 30 days.

4. Upon admission of the petition, the Tribunal implemented a Moratorium under Section 14 of the Code, prohibiting legal actions against the Corporate Debtor and safeguarding its assets during the Insolvency Resolution Process. Essential supplies to the Corporate Debtor must continue, and the Moratorium remains effective until the completion of the resolution process or the approval of a Resolution Plan under Section 31 of the Code.

5. Following the Moratorium declaration, the IRP is tasked with making a Public Announcement of the Initiation of Corporate Insolvency Resolution Process as per Section 13 of the Code. This announcement initiates the formal resolution proceedings and informs stakeholders about the ongoing insolvency process, ensuring transparency and compliance with legal requirements.

6. The IRP is mandated to fulfill duties outlined in Sections 15 and 18 of the Code, updating the Tribunal on the progress of the Resolution Process and compliance with the Order within 30 days. The Tribunal grants the IRP the liberty to provide updates earlier if necessary, emphasizing the importance of timely communication and adherence to regulatory obligations to facilitate a smooth resolution process.

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