2022 (5) TMI 920 - 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 - only contention of the Corporate Debtor is that the Application herein has not accounted for the amounts received by way of sale of various assets of the Corporate Debtor and therefore the Application lacks merit - HELD THAT - In the instant case there is a 'financial debt' and there has been a default' in repayment of the same and the said default is far more than Rs. 1 Crore. Thus, this Adjudicating Authority is satisfied that the Financial Creditor has proved its case by placing evidence that default has occurred for which the Corporate Debtor was liable to pay. Hence, the contentions of the Corporate Debtor are overruled - Further the Financial Creditor has fulfilled all the stipulations as required under the provisions of the IB Code, 2016 for the purpose of initiating Corporate Insolvency Resolution Process. In these circumstances, having satisfied with the submissions made by the Petitioner/Financial Creditor, this Adjudicating Authority is inclined to admit the instant Application. The instant application is hereby admitted and this Adjudicating Authority orders the commencement of the Corporate Insolvency Resolution Process (CIRP) which shall ordinarily be completed within the timelines stipulated in the IB Code, 2016 (as amended), reckoning from the day of this order is passed.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Default in repayment of financial debt
3. Acknowledgment of debt and One-Time Settlement (OTS) proposals
4. Dispute over the quantum of claim
5. Compliance with the Insolvency and Bankruptcy Code, 2016

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Company Application was filed by Canara Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of CIRP against M/s. A.L. Sudershan Constructions Company Limited. The Financial Creditor provided various loan facilities to the Corporate Debtor, which defaulted in repayment, leading to the classification of its accounts as non-performing assets (NPA) since 11.06.2006.

2. Default in repayment of financial debt:
The Financial Creditor claimed an outstanding amount of Rs. 239,51,53,055.83/-. Despite repeated requests and demands, the Corporate Debtor failed to repay the dues. The Corporate Debtor acknowledged the liability through several written acknowledgments and proposed multiple OTS, which were not financially viable and thus rejected by the Financial Creditor. The Tribunal noted that there was a 'financial debt' and a 'default' in repayment, which exceeded the threshold limit of Rs. 1 Crore under Section 4 of the IB Code, 2016.

3. Acknowledgment of debt and One-Time Settlement (OTS) proposals:
The Corporate Debtor acknowledged the debt by proposing OTS to the Financial Creditor, including a letter dated 03.03.2018 proposing Rs. 14 Crores and depositing Rs. 50 Lakhs as a token amount. Multiple OTS requests were made in 2021 and 2022, all of which were rejected by the Financial Creditor. The Tribunal found that these acknowledgments and proposals indicated the existence of a financial debt and default.

4. Dispute over the quantum of claim:
The Corporate Debtor argued that the Application did not account for amounts received from the sale of various assets. The Tribunal clarified that disputes about the quantum of the claim do not warrant rejection of an Application under Section 7 of the IB Code, 2016. It is the role of the Resolution Professional to decide the quantum of the claim. The Tribunal found that even after considering the alleged unaccounted amounts, the claim exceeded the threshold limit.

5. Compliance with the Insolvency and Bankruptcy Code, 2016:
The Tribunal noted that the Financial Creditor fulfilled all stipulations under the IB Code, 2016, for initiating CIRP. The Tribunal referred to the Supreme Court's decision in INNOVENTIVE INDUSTRIES LTD. Vs. ICICI BANK & ANR., which mandates admission of the application upon satisfaction of default unless it is incomplete. The Tribunal, satisfied with the evidence of default, admitted the application and ordered the commencement of CIRP.

Conclusion:
The Tribunal admitted the application and commenced the CIRP, appointing Mr. Kalavakolanu Murali Krishna Prasad as the Interim Resolution Professional (IRP). The IRP was directed to take charge of the Corporate Debtor's management, make public announcements, and call for submissions of claims. The Tribunal declared a moratorium prohibiting suits, asset transfers, and other actions against the Corporate Debtor. The Financial Creditor was directed to pay an advance fee for the IRP, and the Registry was instructed to communicate the order to relevant parties and update the Corporate Debtor's status.

Order:
The petition was admitted, and the CIRP was ordered to commence, with specific directions to the IRP and the Financial Creditor to comply with the provisions of the IB Code, 2016. The moratorium was declared, and the Registry was directed to update the status of the Corporate Debtor.