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2022 (8) TMI 711 - Tri - Insolvency and BankruptcyMaintainability 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 - On perusal of the records it is found that the corporate debtor has neither replied nor contested the debt as per legal notice dated 25.01.2020 by the applicant. In the balance sheet as at 31.03.2019, under the head Notes forming the part of the balance sheet , the corporate debtor has shown Rs. 9,03,61,824/- as unsecured loan from the applicant thereby acknowledging the debt. Similarly, under the head Notes forming part of accounts , the corporate debtor has acknowledged that during the year company has received ECB loan amount Rs. 4.75 crore (ROI at LIBOR 3%) from the applicant for the purpose of expansion of existing facilities and acquiring capital goods as per the agreement between both the companies. Though the Joint Venture Agreement (JV) may be still in existence, but, if the default of debt by one JV partner to another is proved, there is no ban in admitting the application. The clause of Arbitration in JV Agreement also cannot be taken on defence to oppose the application under Section 7 since the default of financial debt is established by the admission of corporate debtor in its own records and documents. The present application is complete in terms of Section 7 (5) of the Code. The applicant is entitled to claim its dues, establishing the default in payment of the financial debt beyond doubt - the present application is admitted and CIRP is ordered to be initiated against corporate debtor - Moratorium declared.
Issues:
1. Application under section 7 of Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency process. 2. Validity of loan agreement and default in payment by the corporate debtor. 3. Jurisdiction of the Tribunal to entertain the application. 4. Admission of the application and appointment of Insolvency Resolution Professional. 5. Direction for depositing funds with the Interim Resolution Professional and imposition of moratorium. Issue 1: Application under section 7 of Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency process: The application was filed under section 7 of the IBC, 2016 by the Applicant, seeking to initiate the Corporate Insolvency process against the Corporate Debtor. The Applicant had entered into a Loan Facility Agreement with the Corporate Debtor, and upon default in payment, legal notices were issued demanding repayment. The Corporate Debtor failed to contest the debt, acknowledging it in its balance sheet, thus establishing the default beyond doubt. The Tribunal found the application complete under Section 7(5) of the Code, admitted it, and ordered the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. Issue 2: Validity of loan agreement and default in payment by the corporate debtor: The Loan Facility Agreement between the Applicant and the Corporate Debtor outlined terms for disbursement and repayment of a substantial sum. Despite the issuance of legal notices and demands for repayment, the Corporate Debtor failed to comply, leading to the application under section 7 of IBC, 2016. The Corporate Debtor, in its balance sheet and notes, acknowledged the debt owed to the Applicant, further solidifying the default in payment. The Tribunal concluded that the default in financial debt was established, justifying the admission of the application and initiation of CIRP against the Corporate Debtor. Issue 3: Jurisdiction of the Tribunal to entertain the application: The Tribunal confirmed its jurisdiction to entertain and try the application as the registered office of the Corporate Debtor was located within its territorial jurisdiction. This validation of jurisdiction allowed the Tribunal to proceed with the examination of the application and subsequent orders related to the Corporate Insolvency Resolution Process against the Corporate Debtor. Issue 4: Admission of the application and appointment of Insolvency Resolution Professional: Following a detailed review of submissions, documents, and records, the Tribunal admitted the application under Section 7(5) of the IBC, 2016. Ms. Poonam Basak was proposed by the Applicant and appointed as the Insolvency Resolution Professional (IRP) for the Corporate Debtor. The IRP's appointment was subject to specific conditions, including the absence of pending disciplinary proceedings. The Tribunal directed the Financial Creditor to deposit funds with the IRP to cover expenses related to the Insolvency Resolution Process, ensuring compliance with regulatory requirements. Issue 5: Direction for depositing funds with the Interim Resolution Professional and imposition of moratorium: The Tribunal directed the Financial Creditor to deposit a specified sum with the Interim Resolution Professional, Ms. Poonam Basak, to facilitate the functions assigned to the IRP during the Corporate Insolvency Resolution Process. Additionally, the admission of the application triggered the imposition of a moratorium under Section 14(1) of the IBC, 2016, prohibiting certain actions against the Corporate Debtor. The terms of the moratorium were outlined, and compliance with relevant Code sections was emphasized, ensuring the orderly progression of the insolvency resolution proceedings. This detailed analysis covers the key issues addressed in the legal judgment delivered by the National Company Law Tribunal, Ahmedabad, regarding the application under the Insolvency and Bankruptcy Code, 2016, and the subsequent orders for initiating Corporate Insolvency Resolution Process against the Corporate Debtor.
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