2019 (5) TMI 388 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - corporate debtor - sub-section (1) of Section 60 of the Code - appointment of an Interim Resolution Professional - It is the case of the respondent that there is no Financial Debt as defined under Section 5(8) of the IBC, 2016 as there is no consideration for the time value of the money and that the Applicant has failed to prove the same. HELD THAT - The procedure in relation to the Initiation of Corporate Insolvency Resolution Process by the Financial Creditor is delineated under Section 7 of the Code, wherein only Financial Creditor / Financial Creditors can file an application. As per Section 7(1) of the Code an application could be maintained by a Financial Creditor either by itself or jointly with other Financial Creditors - 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. In the present case it is reiterated that the applicant had sanctioned and disbursed the loan amount from time to time recoverable with applicable interest by entering into loan agreements with the corporate debtor. The corporate debtor had borrowed the credit facilities against payment of interest as agreed between the parties. The loan was disbursed against the consideration for time value of money with a clear commercial effect of borrowing. Moreover, the debt claimed in the present application includes both the component of outstanding principal and interest - In that view of the matter not only the present claim comes within the purview of Financial Debt but also the applicant can clearly be termed as Financial Creditor so as to prefer the present application under Section 7 of the Code. In terms of Section 7(5)(a) of the Code, the present application is admitted - moratorium in terms of Section 14 of the Code declared.

Summary

Issues Involved:
1. Jurisdiction and Admissibility
2. Financial Debt Definition
3. Default and Debt Amount
4. Solvency of Corporate Debtor
5. Procedural Completeness
6. Appointment of Interim Resolution Professional (IRP)
7. Moratorium and Consequences

Issue-wise Detailed Analysis:

1. Jurisdiction and Admissibility:
The application was filed by ICICI Bank Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against M/s VIL Limited. The Tribunal confirmed its territorial jurisdiction over the NCT of Delhi as the registered office of the corporate debtor is located in New Delhi.

2. Financial Debt Definition:
The respondent argued there was no "Financial Debt" under Section 5(8) of the IBC, 2016, as there was no consideration for the time value of money. The Tribunal found that the credit facilities extended by the applicant were recoverable with applicable interest, thus constituting a financial debt. The debt included both principal and interest, satisfying the definition of "Financial Debt."

3. Default and Debt Amount:
The respondent claimed no sum was due or payable and disputed the quantum of debt. The Tribunal noted that the applicant provided overwhelming evidence, including loan agreements, guarantee deeds, and bank statements, proving the default. The respondent's account was classified as a Non-Performing Asset (NPA) on 30 September 2017, with a total default amount of ?46,28,29,952.44 as of 30.09.2018.

4. Solvency of Corporate Debtor:
The respondent contended that it was a solvent company affected by market conditions and internal disagreements among lenders. The Tribunal held that mere assertions of solvency were insufficient. The applicant's claim of outstanding dues around INR 463 million indicated significant default, triggering the Code for defaults of ?1 lakh or more.

5. Procedural Completeness:
The respondent alleged defects in the petition. The Tribunal found the application complete, filed in "Form-I" under Section 7 of the Code, with all required details and evidence of default. The Tribunal emphasized that an application under Section 7 is maintainable if the debt is due, and there is a default of at least ?1 lakh.

6. Appointment of Interim Resolution Professional (IRP):
The applicant proposed Shri Vijender Sharma as the IRP, who agreed to the appointment and provided necessary declarations. The Tribunal appointed him as the IRP, finding no pending disciplinary proceedings against him.

7. Moratorium and Consequences:
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.
- Foreclosure or enforcement of security interest.
- Recovery of property occupied by the corporate debtor.

The moratorium did not apply to transactions notified by the Central Government or essential goods/services. The IRP was directed to perform duties under Sections 15, 17, 18, 19, 20, and 21 of the Code, with all personnel connected with the corporate debtor required to cooperate.

Conclusion:
The Tribunal admitted the application under Section 7 of the Code, appointing Shri Vijender Sharma as the IRP and declaring a moratorium. The office was directed to communicate the order to relevant parties and update the status of the corporate debtor on the Registrar of Companies' website.