2017 (11) TMI 225 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - existence of default in payment of debt - Held that - The material on record clearly go to show that in order to finance the project of Aura Mall , Respondent- Corporate Debtor borrowed monies from HUDCO and Dena Bank and furnished Securities, Guarantee Agreements and Corporate Guarantee, as well as Pledge of Shares. The Registered Assignment Agreements executed by HUDCO and Dena Bank in favour of the Applicant clearly show that the monies borrowed from them along with the Securities were assigned to the Applicant. Since the monies were borrowed by the Corporate Debtor from the HUDCO and Dena Bank on interest basis, it is a financial debt . Such financial debt has been assigned to the Applicant. Moreover, the Applicant has also granted Additional Financial Assistance of ₹ 12 Crores and ₹ 5 Crores to the Respondent on interest basis. Therefore, it is also a financial debt . The documents on record, including the Notice under SARFAESI Act, clearly show that a default has been committed by the Respondent in repayment of the financial debt. Therefore, Applicant is a Financial Creditor and Respondent is a Corporate Debtor . A default has been committed by the Corporate Debtor in repayment of the financial debt. The Applicant proposed the name of Mr. Devendra Padamchand Jain as Interim Insolvency Resolution Professional and also filed his Written Communication. In view of the above discussion, this Application deserves to be admitted and it is accordingly admitted under Section 7(5) of the Code. The Interim Insolvency Resolution Professional is hereby directed to cause public announcement of the initiation of Corporate Insolvency Resolution Process and call for submission of claims under Section 13(l)(b) read with Section 15 of the Code and Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The other Secured and Unsecured Creditors and Operational Creditors are also entitled to file their claims before the Interim Insolvency Resolution Professional. Also order moratorium under Section 13(1)(a) of the IB Code accordingly.

Summary

Issues Involved:

1. Territorial Jurisdiction of the Adjudicating Authority
2. Existence of Default
3. Completeness of the Application
4. Appointment of Interim Insolvency Resolution Professional
5. Moratorium under Section 13(1)(a) of the IB Code

Detailed Analysis:

1. Territorial Jurisdiction of the Adjudicating Authority:

The Respondent contested the jurisdiction of the National Company Law Tribunal (NCLT), Ahmedabad, citing agreements that specified Mumbai courts' jurisdiction. The Tribunal clarified that parties cannot confer jurisdiction beyond the territorial, subject-matter, and pecuniary limits established by law. Under Section 60(1) of the IB Code, the NCLT having jurisdiction over the registered office of the corporate person is the appropriate authority. Since the Corporate Debtor's registered office is in Bhopal, the NCLT Ahmedabad has the territorial jurisdiction to entertain the Corporate Insolvency Resolution Process.

2. Existence of Default:

The Tribunal referred to the Hon’ble National Company Law Appellate Tribunal's decision in Innoventive Industries Ltd. v. ICICI Bank, which mandates the adjudicating authority to ascertain the existence of default from records or evidence provided by the financial creditor. The Financial Creditor provided comprehensive documentation, including loan agreements, restructuring agreements, and notices under the SARFAESI Act, evidencing the Corporate Debtor's default in repayment of financial debt. The Corporate Debtor’s acknowledgment of its inability to meet loan obligations further substantiated the existence of default.

3. Completeness of the Application:

The Tribunal found the application complete after the Applicant rectified initial defects by submitting certified statements of account. The Respondent's objections regarding the interest rate and termination of services were deemed irrelevant to the determination of default. The Tribunal emphasized that the material on record, including registered assignment agreements and security documents, demonstrated the financial debt and the Corporate Debtor's default.

4. Appointment of Interim Insolvency Resolution Professional:

The Tribunal appointed Shri Devendra Padamchand Jain as the Interim Insolvency Resolution Professional (IRP) under Section 13(1)(c) of the IB Code. The IRP was directed to make a public announcement of the initiation of the Corporate Insolvency Resolution Process and call for submission of claims under Section 13(1)(b) read with Section 15 of the Code and Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

5. Moratorium under Section 13(1)(a) of the IB Code:

The Tribunal ordered a moratorium prohibiting the following actions as per Section 14 of the IB Code:
- Institution or continuation of suits or proceedings against the Corporate Debtor.
- Transfer, encumbrance, or disposal of any assets or legal rights of the Corporate Debtor.
- Foreclosure, recovery, or enforcement of any security interest created by the Corporate Debtor.
- Recovery of property by an owner or lessor occupied by the Corporate Debtor.

The moratorium does not apply to the supply of essential goods or services to the Corporate Debtor and transactions notified by the Central Government in consultation with financial sector regulators. The moratorium is effective from the date of the order until the completion of the Corporate Insolvency Resolution Process.

Conclusion:

The application was admitted under Section 7(5) of the IB Code, and the Tribunal directed the IRP to proceed with the necessary steps for the Corporate Insolvency Resolution Process. The order emphasized the thorough examination of the default and the completeness of the application, affirming the Tribunal's jurisdiction and adherence to legal procedures.