2019 (1) TMI 452 - Tri - Insolvency and Bankruptcy

Admission of petition under Insolvency and Bankruptcy Code, 2016 - Initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - the Corporate Debtor committed default on 01.10.2014 in repayment of facilities granted to the Corporate Debtor to the extent of 32,95,42,170/-, under Section 7 of Insolvency and Bankruptcy Code, 2016 - Held that - The Corporate Debtor defaulted in repaying the loan availed and has also placed the name of the Insolvency Resolution Professional to act as Interim Resolution Professional and there being no disciplinary proceedings pending against the proposed resolution professional, therefore the Application under sub-section (2) of section 7 is taken as complete. This Petition is admitted.

Issues Involved:
1. Completeness of the petition.
2. Qualification of financial debt.
3. Issuance of demand notice.
4. Disclosure of relevant documents.
5. Occurrence of default and subsequent loan sanction.
6. Classification of account as NPA.
7. Non-disbursement of loan.
8. Discrepancy in the claimed amount.
9. Discrepancy in interest calculation.
10. Limitation period applicability.
11. Allegations of falsehood and suppression of facts.
12. Pendency of other legal remedies.

Detailed Analysis:

1. Completeness of the Petition:
The Corporate Debtor argued that the petition was incomplete and flawed. However, the tribunal found that the necessary details required under Form 1 were provided by the Petitioner, thus rejecting this contention.

2. Qualification of Financial Debt:
The Corporate Debtor contended that the Petitioner failed to qualify the alleged financial debt within the parameters of the Code. The tribunal rejected this argument, stating that the term loan granted by a Financial Institution qualifies as a financial debt under Section 5(8)(a) of the Code, which includes money borrowed against payment of interest.

3. Issuance of Demand Notice:
The Corporate Debtor claimed that the petition was filed without issuing any demand notice, violating the principle of natural justice. The tribunal clarified that Section 7 of the Code does not require a demand notice before filing a petition by a Financial Creditor. The Corporate Debtor had already raised its defenses and filed replies, ensuring no violation of natural justice.

4. Disclosure of Relevant Documents:
The Corporate Debtor argued that the Petitioner did not disclose a letter dated 14.03.2015, which mentioned a different default date. The tribunal held that non-disclosure or mistake in the default date does not absolve the Corporate Debtor's liability.

5. Occurrence of Default and Subsequent Loan Sanction:
The Corporate Debtor contended that the occurrence of default on 01.10.2014 was incorrect due to a new loan sanction on 20.10.2014. The tribunal noted that the loan was not disbursed, and the bank had the discretion to cancel the sanction. Hence, the default remained valid.

6. Classification of Account as NPA:
The Corporate Debtor argued that the classification of the account as NPA was against RBI guidelines. The tribunal stated that its mandate is to determine the existence of debt and default, not to delve into RBI circulars. The debt and default were evident from the documents.

7. Non-disbursement of Loan:
The Corporate Debtor claimed that the Petitioner defaulted in disbursing the loan, causing losses. The tribunal found this defense invalid as the Corporate Debtor remained silent for four years and raised the issue only after the petition was filed.

8. Discrepancy in the Claimed Amount:
The Corporate Debtor pointed out a discrepancy between the amount claimed in the petition and the SARFAESI notice. The tribunal attributed this difference to subsequent interest and deemed the contention invalid.

9. Discrepancy in Interest Calculation:
The Corporate Debtor's grievance regarding interest calculation was directed to be addressed by the Insolvency Resolution Professional during the claim admission process, not at the petition admission stage.

10. Limitation Period Applicability:
The Corporate Debtor argued that the claim was barred by limitation. The tribunal noted that a mortgage was registered on 29.02.2012, and payments were made in December 2014, thus the claim was within the limitation period. The Corporate Debtor's reliance on the Supreme Court decision in "B. K. Educational Services Private Limited vs. Parag Gupta and Associates" was found unhelpful.

11. Allegations of Falsehood and Suppression of Facts:
The Corporate Debtor accused the Petitioner of falsehood and suppression of a sanction letter dated 20.10.2014. The tribunal found that the default was continuous from 01.10.2014, and the non-production of the sanction letter did not alter the default status.

12. Pendency of Other Legal Remedies:
The Corporate Debtor argued that existing legal remedies barred the application. The tribunal cited the NCLAT decision in "M/s. Unigreen Global Private Limited v. Punjab National Bank & Anr." which held that pending proceedings under SARFAESI or DRT do not bar the initiation of CIRP under the Code.

Conclusion:
The tribunal admitted the petition, acknowledging the default in loan repayment by the Corporate Debtor. An Insolvency Resolution Professional was appointed, and a moratorium was imposed, prohibiting suits, asset transfers, and recovery actions against the Corporate Debtor. The public announcement of the corporate insolvency resolution process was ordered, and the petition was deemed complete.

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