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2020 (2) TMI 911 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of its debt - existence of financial debt - financial creditor - HELD THAT - In Shailesh Sangani v. Joel Cardoso 2019 (3) TMI 1192 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI , passed on 30.01.2019, the Hon'ble National Company Law Appellate Tribunal, dealing with the issues of 'financial debt' and 'financial creditor' in somewhat identical circumstances held that In view of the decision of the Hon'ble National Company Law Appellate Tribunal in Shailesh Sangani case, the contention of the respondent-corporate debtor that the petitioner is not a financial creditor and the debt due is not a financial debt is also to be rejected. The application filed in the prescribed Form No. I is found to be complete - The conditions provided for in section 7(5)(a) of the Code being satisfied in the present case, the application for initiation of CIRP against White Water Hospitality Private Limited is directed to be admitted - application admitted - moratorium declared.
Issues Involved:
1. Validity of the petition filed by an authorized person. 2. Petition barred by the period of limitation. 3. Time value of money in the transactions. 4. Concealment and misrepresentation of facts. 5. Classification of the debt as financial debt and the petitioner as a financial creditor. Issue-wise Detailed Analysis: 1. Validity of the petition filed by an authorized person: The petition was filed by Ritika Garg, authorized by a Board Resolution from the financial creditor. The Tribunal referenced the Palogix Infrastructure (P.) Ltd. v. ICICI Bank Ltd. case, confirming that an authorized person, not a Power of Attorney holder, can file such applications. Therefore, the contention that the petition was filed by an unauthorized person was deemed untenable. 2. Petition barred by the period of limitation: The Tribunal noted that the financial assistance was recalled on 11.07.2017, and the current petition was filed on 16.03.2018. Since the petition was filed within the limitation period, it was not barred by limitation. 3. Time value of money in the transactions: The financial creditor argued that the Memorandum of Understanding (MOU) dated 02.05.2012 stipulated an 18% per annum interest on the loan amount, thus satisfying the requirement of time value of money. The corporate debtor's contention that the MOU was fabricated was rejected by the Tribunal, which accepted the MOU as evidence that the transactions had the commercial effect of borrowing. 4. Concealment and misrepresentation of facts: The Tribunal decided not to delve into the allegations of document fabrication and forgery raised by the corporate debtor. It emphasized the clear admission of the debt amount of ?43 lakhs by the corporate debtor in its auditor's report. Therefore, the Tribunal did not find it necessary to address other contentions about the debt's validity. 5. Classification of the debt as financial debt and the petitioner as a financial creditor: The Tribunal referred to the Shailesh Sangani v. Joel Cardoso case, which clarified that the disbursement of debt against the consideration for the time value of money qualifies as a financial debt, regardless of whether it bears interest. The Tribunal concluded that the financial creditor's claim met the criteria for financial debt, and thus, the petitioner was a financial creditor. Conclusion: The Tribunal found that the petition met all the requirements under Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016. The application was complete, and there were no disciplinary proceedings against the proposed Interim Resolution Professional. Consequently, the Tribunal admitted the application for the initiation of the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor. Directions: 1. Declaration of moratorium as per Section 14 of the Code. 2. Appointment of Mr. Madan Gopal Jindal as the Interim Resolution Professional. 3. Suspension of the powers of the Board of Directors and vesting the management of the corporate debtor's affairs with the Interim Resolution Professional. 4. The Interim Resolution Professional to make a public announcement, constitute a Committee of Creditors, and file a progress report every fortnight to the Tribunal. The Tribunal directed that a copy of the order be communicated to both parties and the Interim Resolution Professional immediately.
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