2018 (10) TMI 1215 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - application as maintained by a Financial Creditor - default in repayment - Held that - The expressions Financial Creditor and Financial debt have been defined in Section 5(7) and 5(8) of the Code and precisely Financial debt is a debt along with interest, if any, which is disbursed against the consideration for time value of money. The applicant financial creditor has placed on record voluminous and overwhelming evidence in support of the claim as well as to prove the default. In the case on hand, it is seen that respondent corporate debtor has committed default in repayment of the outstanding financial debt. On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. Accordingly, it is seen that 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. As a sequel to the above discussion and in terms of Section 7(5)(a) of the Code, the present application is admitted.

Summary

Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Default in repayment of loans by the Corporate Debtor.
3. Security and guarantees provided for the loans.
4. Restructuring of the debt and subsequent default.
5. Objections raised by the Corporate Debtor.
6. Admissibility of the application by the Financial Creditor.
7. Appointment of Interim Resolution Professional (IRP).
8. Declaration of moratorium under Section 14 of the Code.

Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
ICICI Bank Limited, as the financial creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the respondent company, M/s Apex Buildsys Ltd., referred to as the corporate debtor.

2. Default in repayment of loans by the Corporate Debtor:
The applicant claimed that the respondent company defaulted on various loans, including a rupee term loan facility (RTL-I) of INR 100 crores and a working capital facility loan of INR 60 crores, among others. Despite restructuring agreements and multiple opportunities to repay, the corporate debtor failed to meet its obligations, leading to the classification of its account as a non-performing asset (NPA).

3. Security and guarantees provided for the loans:
The loans were secured by hypothecation of movable and immovable assets, corporate guarantees, and personal guarantees. Various deeds of hypothecation and guarantees were executed to secure the loans. The applicant provided detailed documentation, including loan agreements, deeds of hypothecation, and certificates of registration of charges.

4. Restructuring of the debt and subsequent default:
The debt was restructured through a restructuring agreement dated 31 December 2014, which included the continuation of existing securities and guarantees. Despite the restructuring, the corporate debtor defaulted on the restructured facilities. The applicant revoked the restructuring agreement due to continued defaults, reinstating the original liabilities.

5. Objections raised by the Corporate Debtor:
The corporate debtor argued that it was a solvent company and blamed the lenders for the failure of the loan restructuring. It also cited market conditions and inter se disagreements among lenders as reasons for its inability to repay. However, the tribunal noted that the Code triggers upon default of rupees one lakh or more and that the applicant bank had provided sufficient evidence of default.

6. Admissibility of the application by the Financial Creditor:
The tribunal confirmed that the applicant bank was a financial creditor and that the debt qualified as a financial debt under the Code. The application was found to be complete, and there were no disciplinary proceedings pending against the proposed IRP. The tribunal emphasized that the existence of default and the completeness of the application were the primary criteria for admission.

7. Appointment of Interim Resolution Professional (IRP):
Mr. Gian Chand Narang was appointed as the Interim Resolution Professional (IRP) with registration number IBBI/IPA-002/IP-N000362/2017-18/11031. The IRP was directed to make a public announcement regarding the admission of the application and to perform all functions as per the Code.

8. Declaration of moratorium under Section 14 of the Code:
A moratorium was declared, prohibiting the institution or continuation of suits, transferring or disposing of assets, and actions to recover or enforce security interests. The moratorium would not apply to transactions notified by the Central Government or the supply of essential goods or services.

Conclusion:
The application under Section 7 of the Insolvency and Bankruptcy Code, 2016, was admitted, and the CIRP was initiated against M/s Apex Buildsys Ltd. The IRP was appointed, and a moratorium was declared as per the provisions of the Code. The tribunal directed the office to communicate the order to the relevant parties within seven days.