2022 (8) TMI 421 - AT - Insolvency and Bankruptcy

Validity of petition admitted - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - The Adjudicating Authority under Section 7 of the Insolvency Bankruptcy Code, 2016 is to ascertain whether there is a Debt and Default committed by the Corporate Debtor. Always, it is open to the Corporate Debtor to point out that the Default has not occurred and the Debt / Default Claim is not due - this Tribunal on going through the Impugned Order passed by the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench, Hyderabad) is of the considered view that the aspect of Debt and Default were established. When once the Debt due and payable in Law and in fact is established on the part of the Financial Creditor / Bank in a given case, then the rigour of Section 7 of the Insolvency Bankruptcy Code, 2016 comes into operative plea. More importantly, the Default incurred by the Corporate Debtor / 3rd Respondent is not disputed on behalf of the Appellant before this Appellate Tribunal. To put it precisely, the Corporate Debtor had acknowledged that on 05.05.2019 a sum of Rs.63,36,61,897.26 was due and that was reflected in the Balance Sheet dated 31.03.2019. This Tribunal unhesitatingly, comes to a consequent conclusion that the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench, Hyderabad) had rightly admitted the CP(IB) No.109/7/HDB/2020 on 27.06.2022 filed by the 1st Respondent / Financial Creditor / Bank (Syndicate Bank) and that the Impugned Order is free from legal flaws and consequently the instant Company Appeal fails. Appeal dismissed.

Summary

Issues:
Admission of Section 7 Application under Insolvency & Bankruptcy Code, 2016 by the Adjudicating Authority.
Consideration of One Time Settlement (OTS) proposals.
Debt and default claims by the Financial Creditor.
Evaluation of the Impugned Order by the Appellate Tribunal.

Analysis:
1. The Adjudicating Authority admitted the Section 7 Application under the Insolvency & Bankruptcy Code, 2016, filed by the Financial Creditor, based on the establishment of financial debt and default by the Corporate Debtor. The Authority noted the availing of credit facilities and non-payment by the Corporate Debtor, leading to the decision to put the Corporate Debtor in Corporate Insolvency Resolution Process (CIRP).

2. The Appellant contested the Adjudicating Authority's decision, highlighting the One Time Settlement (OTS) proposals made and the ongoing negotiations for settlement. The Appellant acknowledged the debt and default aspect but sought time for a possible settlement with the Financial Creditor.

3. The Financial Creditor, represented by the Bank, argued that the Adjudicating Authority rightly considered the acknowledgment of debt by the Corporate Debtor, as reflected in the Balance Sheet entries. The rejection of previous OTS proposals was also emphasized as undisputed facts.

4. The Financial Creditor presented the history of working capital limits sanctioned to the Corporate Debtor, secured with collateral securities and personal guarantees. The outstanding debt amounts were detailed to establish the default and debt claims against the Corporate Debtor.

5. The Adjudicating Authority's decision was based on the established debt and default by the Corporate Debtor, as evidenced by the Balance Sheet entries and rejected OTS proposals. The Tribunal found no legal flaws in the Impugned Order and upheld the admission of the Section 7 Application.

6. The Appellate Tribunal dismissed the Company Appeal, emphasizing the Financial Creditor's successful establishment of debt and default, leading to the rejection of the appeal without costs. The Stay Application and Exemption Application were also closed as a result of the judgment.