2017 (12) TMI 1148 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - proof of eligible debt - Held that - While the petition was pending we granted numerous opportunities to the Financial Debtor for settlement with the Financial Creditor. In that regard reference may be made to the interlocutory order dated 23.08.2017. According to the aforesaid order the parties were given opportunity to reconcile all the loan accounts with each other and explore the possibility of settlement of the accounts and the matter was to be disposed of on merits if such a settlement is not reached. On 07.09.2017 the hearing was deferred to facilitate the settlement. Even we delayed the dictation of this order as the Financial Debtor has been asking for time up to 15.10.2017 and the order was reserved on 09.10.2017. There is no settlement insight despite the expiry of about six weeks, therefore, the efforts of the Financial Debtor to enter into a settlement has not born any fruit and we are not in a position to further delay the admission of the present petition. All this has been done in order to avoid the triggering of Insolvency process so that the Financial Debtor may continue with his enterprise and there is no demoralising effect. Alas all these efforts are in vain. We find that there is admission with regard to loan and its default. The Financial Creditor has also named the Interim Resolution Professional and it satisfies all the requirements of Section 7 of the Code. Therefore, the petition warrants admission and the same is hereby admitted.

Summary

Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Financial debt and default by the Corporate Debtor.
3. Evidence of default and security held by the Financial Creditor.
4. Arguments for and against the admission of the petition.
5. Compliance with principles of natural justice.
6. Settlement efforts between the parties.
7. Admission of the petition and declaration of moratorium.

Issue-wise Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The 'Financial Creditor', Indiabulls Housing Finance Limited, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to trigger the Corporate Insolvency Resolution Process (CIRP) against Deltronix India Private Limited (the Corporate Debtor).

2. Financial debt and default by the Corporate Debtor:
The Financial Creditor granted various loans to the Corporate Debtor totaling ?31,00,56,304. The principal amount in default under the five loan agreements as of 21.07.2017 was ?13,01,14,268, with the particular date of default for each loan being 27.07.2017.

3. Evidence of default and security held by the Financial Creditor:
The Financial Creditor provided overwhelming evidence to prove the default, including loan agreements, computation of the amount of default, and security details such as a deed of mortgage and share pledge agreement. The estimated value of the mortgaged property and pledged shares was approximately ?31,71,10,800 and ?20,00,000, respectively.

4. Arguments for and against the admission of the petition:
The Financial Creditor argued that the Corporate Debtor defaulted on multiple occasions and that the total amount of default was over ?13 crores. The Corporate Debtor opposed the admission, arguing that the Insolvency and Bankruptcy Code aims to explore negotiated resolutions before triggering CIRP and that the petition was filed prematurely due to a one-day delay in payment.

5. Compliance with principles of natural justice:
The Tribunal found that the Financial Debtor had adequate notice regarding the breach of terms of the loan agreement and requests for payment of defaulted EMIs. The principles of natural justice were adequately complied with, and the petition was not premature.

6. Settlement efforts between the parties:
Numerous opportunities were granted to the Financial Debtor to settle with the Financial Creditor. Despite efforts over six weeks, no settlement was reached. The Tribunal noted that all efforts to avoid triggering the insolvency process were in vain.

7. Admission of the petition and declaration of moratorium:
The petition was admitted, and a public announcement was directed to be made by the Interim Resolution Professional (IRP). A moratorium was declared in terms of Section 14 of the Code, imposing prohibitions on the institution of suits, transferring assets, enforcing security interests, and recovering property occupied by the Corporate Debtor. The IRP was directed to perform all functions as per the Code, Rules, and Regulations, and all personnel connected with the Corporate Debtor were obligated to extend cooperation.

Conclusion:
The petition was disposed of with directions for the IRP to manage the Corporate Debtor's affairs and protect its property. The office was directed to communicate the order to the Financial Creditor and the Corporate Debtor within seven days.