2018 (9) TMI 1225 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Sufficient evidence of financial debt - Held that - The applicant bank has also placed CRILC report in order to show that accounts of corporate debtor was reported as loss and doubtful account. It has been shown that the company has defaulted in repayment of the loan to the applicant and that huge debts are outstanding as reflected in the statement of accounts of the company. Certified copy of statement of account kept during the course of banking business basing on which the claim has been raised can be termed as sufficient evidence of financial debt. The material placed on record clearly goes to show that respondent corporate debtor has availed the loan facilities and has committed default in repayment of the loan amount. An application under Section 7 of the Code is acceptable so long as the debt is proved to be due and there has been occurrence of existence of default. What is material is that the default is at least 1 lakh. In view of Section 4 of the Code, the moment default is of Rupees one lakh or more, the application to trigger Corporate Insolvency Resolution Process under the Code is maintainable. The applicant 'financial creditor' has placed on record voluminous and overwhelming evidence in support of the claim as well as to prove the default. Moreover, the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been a default in payment of the financial debt. In terms of Section 7(5)(a) of the Code, the present application is admitted.

Summary

Issues Involved
1. Jurisdiction and Admissibility of the Application.
2. Loan Sanction and Default.
3. Evidence of Financial Debt and Default.
4. Appointment of Interim Resolution Professional (IRP).
5. Declaration of Moratorium.

Issue-wise Detailed Analysis

1. Jurisdiction and Admissibility of the Application
The application was filed by Andhra Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s Kalptaru Steel Rolling Mills Limited. The Tribunal had territorial jurisdiction as the registered office of the corporate debtor is in New Delhi. The application was complete, and there were no disciplinary proceedings against the proposed IRP.

2. Loan Sanction and Default
The applicant bank had sanctioned various loan facilities to the respondent company, including an OCC limit of ?2.50 crores and ILC limit of ?2.50 crores, which were later increased to a total of ?22.00 crores. The respondent company accepted the terms and conditions, executed necessary loan documents, and created a mortgage over properties to secure the loans. Despite these arrangements, the respondent defaulted on repayment, leading to the classification of the account as NPA on 30.06.2013.

3. Evidence of Financial Debt and Default
The applicant bank provided voluminous evidence, including Board resolutions, loan agreements, demand promissory notes, and certified statements of account. The respondent company had borrowed various credit facilities against the payment of interest, and the debt included both the principal and interest components. The default amount exceeded ?1 lakh, making the application maintainable under Section 4 of the Code.

4. Appointment of Interim Resolution Professional (IRP)
Shri Prabhakar Nandiraju was proposed as the IRP, and he satisfied the requirements under Section 7(3)(b) of the Code. The Tribunal appointed him as the IRP and directed him to make a public announcement regarding the admission of the application within three days.

5. Declaration of Moratorium
The Tribunal declared a moratorium under Section 14 of the Code, prohibiting:
- Institution or continuation of suits or proceedings against the corporate debtor.
- Transferring or disposing of any assets of the corporate debtor.
- Actions to foreclose or enforce any security interest.
- Recovery of any property by an owner or lessor.

The moratorium does not apply to transactions notified by the Central Government or the supply of essential goods or services to the corporate debtor.

Conclusion
The Tribunal admitted the application under Section 7 of the Code, appointed Shri Prabhakar Nandiraju as the IRP, and declared a moratorium. The IRP was directed to perform his duties with utmost dedication and in accordance with the provisions of the Code, Rules, and Regulations. The office was instructed to communicate the order to the financial creditor, the corporate debtor, and the IRP within seven days.