2022 (7) TMI 1187 - 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 - Mere plain reading of the provision under section 7 of IBC shows that in order to initiate CIRP under Section 7 the applicant is required to establish that there is a financial debt and that a default has been committed in respect of that financial debt. That while dealing with an application under section 7 the Adjudicating Authority is required to consider the question whether the 'debt' and 'default' is proved or not. In the present case, the Corporate Debtor, in his reply admitted the debt and liability, further vide daily order dated 09.05.2022 the Corporate Debtor has again admitted its liability and has expressed its inability to pay the outstanding amount of Rs. 1,32,91,986/- - the Loan agreements executed between the Financial Creditor and the Corporate Debtor clearly substantiate the Financial Creditor's claim that the Corporate Debtor has defaulted on repayment which is duly admitted by Corporate Debtor. In the interest of justice, this Tribunal has granted ample opportunities to both the parties to explore the possibilities of an amicable resolution of the matter, however, the parties have failed to arrive at settlement - upon appreciation of the documents placed on record to substantiate the claim, this Tribunal admits this petition and initiates CIRP on the Corporate Debtor with immediate effect. Application admitted - moratorium declared.

Issues:
1. Application for Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code.
2. Respondent's contentions of repayment arrangements and inability to pay.
3. Adjudication of debt and default under Section 7.
4. Admission of debt by the Corporate Debtor.
5. Tribunal's decision to admit the petition and initiate CIRP.
6. Appointment of Interim Resolution Professional.
7. Declaration of moratorium and its implications.

Analysis:
1. The applicant, a Financial Creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code against the Corporate Debtor for defaulting on a loan amount. The Applicant detailed the transactions leading to the application, including the loan agreement and default in payments.

2. The Respondent, in their reply, contended that the petition was an abuse of process and expressed willingness to make payments within a reasonable time. They cited economic challenges as reasons for non-payment and prayed against initiating CIRP.

3. The Tribunal analyzed the provisions of Section 7 of the IBC, emphasizing the need to establish financial debt and default to initiate CIRP. The Corporate Debtor admitted the debt and liability, expressing an inability to pay the outstanding amount.

4. Considering the admission of debt by the Corporate Debtor and the loan agreements, the Tribunal found substantial evidence of default on repayment, leading to the initiation of CIRP.

5. After thorough consideration and failed attempts at settlement, the Tribunal admitted the petition, initiating CIRP on the Corporate Debtor. An Interim Resolution Professional was appointed as per the requirements of the Code.

6. The appointed Interim Resolution Professional was tasked with specific functions under the Code and directed to file a report within 30 days. The Tribunal declared a moratorium, prohibiting certain actions against the Corporate Debtor to facilitate the resolution process.

7. The moratorium's provisions were outlined, specifying exceptions and ensuring the Interim Resolution Professional's diligent adherence to the Code's regulations throughout the proceedings.

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