2018 (11) TMI 690 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - default in payment of dues - non repayment of the outstanding loan amount - Held that - The applicant financial creditor has placed on record voluminous and overwhelming evidence in support of the claim as well as to prove the default. It is pertinent to mention here that the Code requires the adjudicating authority to only ascertain and record satisfaction in a summary adjudication as to the occurrence of default before admitting the application. The material on record clearly goes to show that respondent had availed the loan facilities and has committed default in repayment of the outstanding loan amount. 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. Territorial jurisdiction of the Tribunal.
2. Financial debt particulars and default.
3. Objections by the respondent regarding the applicant's authority.
4. Appointment of Interim Resolution Professional (IRP).
5. Allegations of coercion and improper documentation.
6. Disputes over the quantum of financial debt.
7. Pendency of other proceedings.
8. Requests for financial restructuring by the respondent.
9. Compliance with Section 7 of the Insolvency and Bankruptcy Code (IBC).

Detailed Analysis:

1. Territorial Jurisdiction:
The Tribunal confirmed its territorial jurisdiction over the NCT of Delhi as the registered office of the respondent corporate debtor is located in New Delhi, in accordance with sub-section (1) of Section 60 of the Insolvency and Bankruptcy Code, 2016.

2. Financial Debt Particulars and Default:
The applicant, State Bank of India, detailed the financial debt granted to the respondent, including working capital and multiple banking arrangements, totaling significant amounts over various years. The applicant claimed a default amount of ?287,30,27,863.47 as of 17.02.2018. The respondent's accounts were classified as Non-Performing Assets (NPA) by the applicant on 30.11.2011, and by State Bank of Hyderabad on 28.11.2011, due to failure in repayment.

3. Objections by the Respondent Regarding the Applicant's Authority:
The respondent argued that the applicant bank lacked the legal authority to initiate proceedings without the consent of other consortium banks. The Tribunal dismissed this objection, citing Section 7(1) of the Code, which allows a financial creditor to file an application individually or jointly. The Tribunal referenced the NCLAT decision in Asian Natural Resources (India) Ltd. v. IDBI Bank Limited, affirming that inter-se agreements between banks do not override statutory provisions.

4. Appointment of Interim Resolution Professional (IRP):
The applicant proposed Mr. Arvind Garg as the IRP, who provided the necessary disclosures and declarations as required by the Code. The Tribunal found the selection and appointment process compliant with the Code's requirements, rectifying any initial defects in the documentation.

5. Allegations of Coercion and Improper Documentation:
The respondent alleged that the applicant bank coerced them into signing blank documents. The applicant countered that all security documents were duly executed and the terms were mutually agreed upon. The Tribunal found no evidence to support the respondent's claims and upheld the validity of the loan agreements.

6. Disputes Over the Quantum of Financial Debt:
The respondent disputed the amount claimed by the applicant, including interest rates and the NPA declaration. The Tribunal clarified that its role is to ascertain the occurrence of default, not to determine the exact quantum of debt, which can be addressed by the resolution professional or committee of creditors.

7. Pendency of Other Proceedings:
The respondent argued that ongoing proceedings before the Debts Recovery Tribunal (DRT) and actions under the SARFAESI Act should bar the current application. The Tribunal rejected this, stating that such proceedings do not impede the initiation of the Corporate Insolvency Resolution Process under Section 7 of the Code.

8. Requests for Financial Restructuring by the Respondent:
The respondent claimed that their requests for additional financial facilities or restructuring were ignored by the consortium of banks. The Tribunal noted that without a binding compromise agreement, it could not defer the applicant's petition under Section 7 of the Code.

9. Compliance with Section 7 of the Insolvency and Bankruptcy Code (IBC):
The Tribunal reviewed the application under Section 7, ensuring it was complete, the default had occurred, and no disciplinary proceedings were pending against the proposed IRP. The Tribunal referenced the Supreme Court decision in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd., emphasizing that satisfaction of these criteria mandates the admission of the application.

Conclusion:
The Tribunal admitted the application under Section 7 of the Code, appointed Mr. Arvind Garg as the Interim Resolution Professional, and declared a moratorium as per Section 14 of the Code. The Tribunal directed the IRP to make a public announcement and perform duties as required under the Code, while all personnel connected with the corporate debtor were mandated to cooperate with the IRP.