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2020 (3) TMI 489 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of debt - existence of debt and dispute or not - HELD THAT - It is evident from the contents of the petition that the Corporate Debtor has defaulted in the repayment of loan of the Bank. It is also observed that despite the service of demand notice dated 06.12.2018 (Annexure A/8) calling upon the Corporate Debtor to discharge in full its liabilities due within a period of 15 days from the date of receipt of the notice, the payment was not received by the Bank - the demand notice dated 06.12.2018 was sent by the Bank after the date of 19.11.2018 of the OTS proposal. Therefore, the OTS proposal is to be taken to be rejected by the Bank. Moreover, the issue involved is whether a default has occurred and pendency, if any, of OTS proposal would be irrelevant. Similarly, the contention of the Corporate Debtor that the market value of the mortgaged immovable properties is more than the outstanding loan is not a bar to the initiation of proceedings under Section 7 of the Code, when occurrence of default is proved. Thus, this petition deserves to be admitted as it is clear that both 'debt' and 'default' are proved beyond doubt here. The application filed in the prescribed Form No. I is found to be complete. Application admitted - moratorium declared.
Issues Involved:
1. Jurisdiction and Admissibility of the Application 2. Evidence of Default 3. One Time Settlement (OTS) Proposal 4. Appointment of Interim Resolution Professional (IRP) 5. Declaration of Moratorium Detailed Analysis: 1. Jurisdiction and Admissibility of the Application: The application was filed by the Central Bank of India under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Corporate Debtor, Luni Power Company Private Limited, was incorporated on 18.05.2001 with its registered address in Himachal Pradesh, thus falling within the jurisdiction of the Chandigarh Bench of the Tribunal. 2. Evidence of Default: The Corporate Debtor had been availing a loan since 2012, sanctioned for setting up a 4.5 MW Hydro Power Project. The loan was to be repaid in 28 quarterly instalments starting from 30.09.2014. However, the repayment was rescheduled to commence from June 2017. The outstanding amount due as of 07.06.2017 was ?17,44,85,568.00, including interest and penal interest. The bank provided evidence of default through the CIBIL report and certified copies of the statement of accounts, which indicated that no repayment had been made after 06.03.2017, and the account was classified as NPA on 07.06.2017. A demand notice dated 06.12.2018 was issued, but no payment was received. 3. One Time Settlement (OTS) Proposal: The Corporate Debtor contended that an OTS proposal was pending with the Financial Creditor and argued that insolvency proceedings should not commence until the OTS proposal was either approved or rejected. The Tribunal noted that the demand notice was sent after the date of the OTS proposal, implying its rejection. The Tribunal clarified that the pendency of an OTS proposal is irrelevant to the initiation of proceedings under Section 7 of the Code if a default has occurred. Additionally, the argument regarding the market value of the mortgaged properties exceeding the outstanding loan was deemed irrelevant to the initiation of insolvency proceedings. 4. Appointment of Interim Resolution Professional (IRP): The application proposed Mr. Sanjay Kumar Agarwal as the IRP, who had filed Form No. 2 certifying no disciplinary proceedings against him. The Tribunal found the application complete and satisfied the conditions under Section 7(5)(a) of the Code. Consequently, Mr. Sanjay Kumar Agarwal was appointed as the IRP with specific directions, including taking control of the Corporate Debtor's assets, making a public announcement, constituting a committee of creditors, and submitting regular progress reports to the Tribunal. 5. Declaration of Moratorium: The Tribunal declared a moratorium in terms of Section 14(1) of the Code, which included: (a) Suspension of suits or proceedings against the Corporate Debtor. (b) Prohibition on transferring or disposing of assets by the Corporate Debtor. (c) Prohibition on actions to enforce security interests. (d) Prohibition on recovery of property from the Corporate Debtor. The moratorium would remain effective until the completion of the corporate insolvency resolution process or until the Tribunal approves a resolution plan or orders liquidation. Conclusion: The Tribunal admitted the application for initiation of CIRP against Luni Power Company Private Limited, declared a moratorium, and appointed Mr. Sanjay Kumar Agarwal as the IRP with detailed directions to manage the insolvency process. The decision was based on the evidence of default and the satisfaction of conditions under Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016.
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