2019 (12) TMI 126 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of outstanding amount - existence of 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 and the respondent company has acknowledged the debt by way of affidavit - In the instant case, the documents produced by the Financial Creditor clearly establish the 'debt' and there is default on the part of the Corporate Debtor in payment of the 'financial debt'. There is existence of default and that the application under Section 7(2) of the Code is also complete in all respect - the petitioner/financial creditor having fulfilled all the requirements of Section 7 of the Code, the instant petition deserves to be admitted. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Default in repayment of financial debt by the corporate debtor.
2. Compliance with the terms and conditions of the credit facilities.
3. Classification of the account as Non-Performing Asset (NPA).
4. Issuance of notices and demands by the financial creditor.
5. Admission of debt by the corporate debtor.
6. Appointment of Interim Resolution Professional (IRP).
7. Declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Default in Repayment of Financial Debt by the Corporate Debtor:
The financial creditor, Bank of India, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking reliefs due to the corporate debtor's default in repaying financial debts. The outstanding amount was ?38,39,36,295.78 as of 13.11.2018, including interest and penalties. The Tribunal acknowledged that the corporate debtor failed to repay the financial debt, thus confirming the occurrence of default.

2. Compliance with the Terms and Conditions of the Credit Facilities:
The corporate debtor had various credit facilities sanctioned by the financial creditor from 21.08.2012 to 08.06.2015. Despite executing acknowledgments of debt and modifications of sanction letters, the corporate debtor failed to comply with the terms and conditions, leading to the account being classified as Non-Performing Asset (NPA) effective from 30.09.2016.

3. Classification of the Account as Non-Performing Asset (NPA):
The financial creditor classified the corporate debtor's account as NPA following the Reserve Bank of India's guidelines due to unsatisfactory operation of the account and failure to regularize the cash credit account, repay interest, and installment dues.

4. Issuance of Notices and Demands by the Financial Creditor:
The financial creditor issued a notice under Section 13(2) read with 13(13) of the SARFAESI Act, 2002, on 11.05.2017, demanding ?31,45,35,338.33 with further interest. Despite frequent requests, reminders, and notices, the corporate debtor failed to regularize the account or repay the dues, leading to the filing of the insolvency petition.

5. Admission of Debt by the Corporate Debtor:
The director of the corporate debtor admitted the dues to the financial creditor and did not object to the appointment of an Interim Resolution Professional (IRP). This admission was supported by an affidavit filed by the corporate debtor.

6. Appointment of Interim Resolution Professional (IRP):
The financial creditor proposed the name of Shri Chandra Prakash Jain as the IRP. The Tribunal verified that no disciplinary proceedings were pending against the proposed IRP, and his appointment was in compliance with the requirements under the Code.

7. Declaration of Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal declared a moratorium prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovering property occupied by the corporate debtor. The moratorium aims to ensure the continuation of essential services to the corporate debtor during the insolvency resolution process.

Conclusion:
The Tribunal found that the financial creditor had fulfilled all requirements under Section 7 of the Code, and the corporate debtor had defaulted on its financial obligations. Consequently, the petition was admitted, and a moratorium was declared. The IRP was appointed to oversee the insolvency resolution process, and the petition was disposed of with no order as to costs.