2019 (7) TMI 577 - Tri - Insolvency and Bankruptcy

Admissibility of petition - initiation of Corporate Insolvency Resolution Process - Section 7 of Insolvency and Bankruptcy Code, 2016, R/w Rule 4 of Insolvency Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 - default in repayment of loan - HELD THAT - It is admitted fact that the Financial Creditor sanctioned the loan and the Corporate failed to repay the loan with in time stipulated. In effect the Corporate Debtor admitted the default. The Financial Creditor is no way responsible for happening of certain events which causes delay in implementation of the Project. Thus, there is no valid objection raised for admission of the Petition. The Contention of the Corporate Debtor is that the company is likely to revive its business. This is not a ground on which the petition can be rejected. Further the corporate debtor admitted default. The Financial Creditor suggested the name of IRP and there is no compliant against proposed IRP. The financial creditor has fulfilled all the requirements as contemplated under Code. The petition is in order. Therefore the petition is fit for admission. Petition admitted - moratorium declared.

Summary

Issues involved:
1. Default in repayment of loan by Corporate Debtor to Financial Creditor.
2. Justification of default by Corporate Debtor due to external factors.
3. Validity of petition under Section 7 of Insolvency and Bankruptcy Code, 2016.
4. Appointment of Interim Resolution Professional and declaration of moratorium.

Detailed Analysis:
1. The Financial Creditor, Andhra Bank, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor, M/s. Lanco Thermal Power Limited, for defaulting on a loan repayment of ?129.99Cr. The Financial Creditor provided evidence of default and non-payment of instalments despite repeated notices and reminders, leading to the petition for admission and appointment of an Interim Resolution Professional.

2. The Corporate Debtor, in response, justified the default by citing various external factors beyond its control that affected the power sector, causing delays and financial challenges. The Corporate Debtor highlighted issues such as delays in approvals, land acquisition problems, policy changes, fuel shortages, and regulatory delays, leading to financial stress in the power sector. The Corporate Debtor also mentioned being categorized as a financially stressed asset by government departments due to sector-wide challenges.

3. The Adjudicating Authority considered the arguments presented by both parties. The Financial Creditor's claim of default and non-repayment was substantiated with documentary evidence, while the Corporate Debtor's justifications for default were acknowledged. However, the Authority found that the Financial Creditor had fulfilled all requirements under the Code for initiating insolvency proceedings. The Authority also noted that the Corporate Debtor's admission of default and lack of valid objections warranted the admission of the petition under Section 7 of the IBC, 2016.

4. Consequently, the Adjudicating Authority admitted the petition, declared a moratorium, and appointed an Interim Resolution Professional to oversee the Corporate Insolvency Resolution Process. The moratorium included restrictions on legal actions against the Corporate Debtor, protection of essential supplies, and specified the duration of the moratorium until the completion of the resolution process or liquidation. The Authority also issued directions for public announcement and appointed the Interim Resolution Professional to manage the proceedings.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the arguments, justifications, and decisions made by the Adjudicating Authority in the case.