2022 (10) TMI 432 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT - It is an undisputed fact that both the parties with a view to settle the matter has entered into an OTS scheme vide letter dated 23.11.2021. Wherein the OTS amount shall be paid on or before 31.03.2022 by the Corporate Debtor. However, the Corporate Debtor vide letter dated 29.11.2021 to the Financial Creditor proposes the amount to be paid up to June, 2022 and the same was rejected by the Financial Creditor via Email dated 30.11.2021. The Corporate Debtor via letter dated 31.12.2021 has accepted to make the payment under the OTS scheme up to March 2022 which was rejected by the Petitioner, citing the Sanction Letter can be issued only after the receipt of Credit Information Report of the other lender ACRE - the Corporate Debtor vide letter dated 26.04.2022, proposes to settle the dues outstanding by One Time Settlement by offering the sum of Rs. 2.66 Crores towards the Principal Dues and committed to pay the OTS sum before 31.03.2023. The same was rejected by the Petitioner vide the letter dated 28.04.2022, stating that the OTS proposal is only towards principal dues and does not address interest, further interest, penal interest and other cost and charges and advised that the application is not received in prescribed format before the last date i.e. 31.12.2021. It is to be noted that the settlement is derived between the parties only upon the acceptance by the parties, which is not in the present case. Hence, the Bench has come to a conclusion that the Corporate Debtor is liable and defaulted in making the payment to the Petitioner - 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. It is clear that the Corporate Debtor has defaulted in repayment of debt. Hence, owing to the inability of the Corporate Debtor to pay its dues, this is a fit case to be admitted u/s 7 of the I B Code - it is found that the Petitioner has not received the outstanding Debt from the Corporate Debtor and that the formalities as prescribed under the Code have been completed by the Petitioner, this Petition deserves Admission . Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Default in repayment of loan by the Corporate Debtor.
2. Validity of the One Time Settlement (OTS) scheme and its acceptance.
3. Admission of the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Default in Repayment of Loan by the Corporate Debtor:
The Petitioner, Small Industries Development Bank of India, filed for the Corporate Insolvency Resolution Process against the Corporate Debtor, Kalra Overseas & Precision Engineering Limited, under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Petitioner claimed a default in repayment of a loan amounting to Rs. 5,78,41,476/-, including interest and penal interest. The particulars of the financial debt were detailed, showing principal outstanding, interest, and other charges. The Petitioner provided various documents, such as deeds of hypothecation, loan agreements, and statements of accounts, to substantiate the financial debt due and payable by the Corporate Debtor.

2. Validity of the One Time Settlement (OTS) Scheme and Its Acceptance:
The Corporate Debtor denied the allegations and contended that the Petitioner had introduced a 'Nondiscriminatory and Non-discretionary One Time Settlement Scheme' for settlement and recovery of non-performing assets. The Respondent accepted the OTS amount of Rs. 1.99 crores and paid 5% of it, requesting more time for the remaining payment. However, the Petitioner rejected the OTS proposal due to the repayment schedule and the unclear NPA status with another lender, ACRE. The Respondent argued that the Petitioner was legally bound to perform its obligations under the OTS scheme and that there existed a binding contract between the parties. The Tribunal noted that the settlement is derived only upon acceptance by both parties, which was not present in this case.

3. Admission of the Corporate Insolvency Resolution Process (CIRP) Under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal found that the Corporate Debtor had defaulted in making payments to the Petitioner. The nature of the debt was identified as "Financial Debt" under Section 5(8) of the Code, and the default was established under Section 3(12) of the Code. The essential qualifications for admission of a petition under Section 7 of the I&B Code, i.e., existence of 'debt' and 'default,' were met. The Tribunal concluded that the Corporate Debtor was liable and had defaulted in repayment. Consequently, the petition was admitted, and the CIRP was initiated against the Corporate Debtor.

Judgment:
The Tribunal appointed Mr. Gajesh Labhchand Jain as the Interim Resolution Professional (IRP) to conduct the Insolvency Resolution Process. The Petitioner was directed to deposit Rs. 5 Lakhs towards initial CIRP costs. The Tribunal ordered a moratorium on suits or proceedings against the Corporate Debtor and ensured the continuation of essential goods or services during the moratorium period. The public announcement of the CIRP was mandated, and the management of the Corporate Debtor was vested in the IRP. The Registry was instructed to update the Master Data of the Corporate Debtor and communicate the order to all parties involved. The petition was admitted, and the CIRP was ordered to commence from the date of the order.