2019 (10) TMI 373 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Failure to make repayment of loans - overdue instalments - existence of debt and dispute or not? - HELD THAT - In the instant application, from the material placed on record by the Applicant, this Authority is satisfied that the Corporate Debtor committed default in paying the financial debt to the Applicant. As can be seen from the Written Communication of the proposed Insolvency Resolution Process, no disciplinary proceedings are pending against him. In the instant case, the documents produced by the Financial Creditor clearly establish the debt and there is a default on the part of the Corporate Debtor in payment of the financial debt . Application admitted - moratorium declared.

Summary

Issues Involved:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Default in repayment of financial debt.
3. Classification of account as Non-Performing Asset (NPA).
4. Initiation of action under SARFAESI Act.
5. Appointment of Interim Resolution Professional (IRP).
6. Declaration of moratorium.

Issue-wise Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The petition was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking relief under Section 7(5)(a) and Section 13(1)(a)(b)(c) of the Code. The applicant, a financial creditor, is a corporate body constituted under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970. The respondent is a company engaged in the construction and development of properties.

2. Default in repayment of financial debt:
The respondent company had availed a term loan of ?5.00 crores from the applicant for a housing project. Despite multiple reminders, the respondent failed to repay the overdue installments and accrued interest. The respondent acknowledged its liability and confirmed the outstanding amount of ?3,37,61,236.11 as of 03.11.2016 but failed to set right the accounts.

3. Classification of account as Non-Performing Asset (NPA):
Due to continuous default in repayment, the respondent's account was classified as NPA on 30.06.2016, with an outstanding amount of ?2,85,05,289.00. The respondent company had sold several flats but failed to deposit the sale proceeds with the bank, breaching the terms and conditions of the loan agreement.

4. Initiation of action under SARFAESI Act:
Following the classification as NPA, the applicant bank issued a notice under Section 13(2) of the SARFAESI Act on 11.11.2016, demanding repayment within 60 days. The respondent failed to comply, leading to further legal actions. The respondent argued that the bank's actions under SARFAESI were put on hold by an order of the Hon'ble High Court, Madhya Pradesh, dated 27.03.2018.

5. Appointment of Interim Resolution Professional (IRP):
The applicant proposed the name of CA Amresh Shukla as the IRP. However, the Adjudicating Authority had reservations about appointing him due to his past conduct in another matter. The applicant was directed to suggest another professional within one week by affidavit. The moratorium order would take effect upon receipt of the affidavit.

6. Declaration of moratorium:
The Tribunal declared a moratorium prohibiting:
- Institution or continuation of suits or proceedings against the corporate debtor.
- Transferring, encumbering, alienating, or disposing of the corporate debtor's assets.
- Actions to foreclose, recover, or enforce any security interest.
- Recovery of property occupied by the corporate debtor.

The supply of essential goods and services to the corporate debtor shall not be terminated during the moratorium. The moratorium will be in effect until the completion of the corporate insolvency resolution process or until a resolution plan is approved or liquidation is ordered.

Conclusion:
The Tribunal found that the respondent defaulted on the financial debt and the application under Section 7(2) of the Code was complete. The petition was admitted, and the moratorium was declared. The applicant was directed to propose a new IRP within one week, and the petition was disposed of with no order as to costs. Copies of the order were to be communicated to all relevant parties.