2020 (10) TMI 65 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor unable to liquidate its financial debt - existence of debt and dispute or not - HELD THAT - If it is established that default has occurred and no disciplinary proceeding is pending against the IRP and application is complete then Adjudicating Authority has no option but to admit the application otherwise if any of the condition is lacking then application is liable to be rejected. Whether there is any dispute or not, this question is not required to be considered while considering the claim of Financial Creditor U/S 7 of IB Code. When we shall consider the case in hand and the aforesaid decision and the provision then we find that in this case in hand, it is admitted fact that respondent had entered into an agreement and which is duly sanctioned by the applicant vide sanctioned letter dated 22.02.2018 and Channel Finance Facility was executed and modified on 09.03.2018 06.07.2018 and in that agreement, the name and address of the sellers is mentioned i.e. Vedanta and Hindalco and payment was directly made to the Vedanta and Hindalco in lieu of goods supplied to the respondent. Therefore, the contention of the respondent that payment has not been made directly to him is not liable to be accepted rather direction was given in Channel Finance Agreement - Ld. Counsel for applicant submitted that legal notice as well as recall of loan notice was also sent to the respondent, under such circumstances, we have no option but to reject the contention of the respondent and we accept the contention of the applicant that loan was duly sanctioned and disbursed but Debt has not be repaid and since there is default and application filed by the applicant is complete, Application is liable to be admitted. Petition admitted - moratorium declared.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC).
2. Validity and execution of financial agreements and documents.
3. Disbursement and repayment of the loan amount.
4. Compliance with legal and evidentiary requirements.
5. Admissibility of the application under Section 7 of IBC.

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC):

The petition was filed under Section 7 of the IBC, seeking initiation of CIRP against the Corporate Debtor due to its inability to liquidate its financial debt. The Applicant, a non-banking financial company (NBFC), claimed that the Corporate Debtor defaulted on a channel finance loan of INR 4,50,00,000/-.

2. Validity and execution of financial agreements and documents:

The Corporate Debtor applied for a channel finance loan, which was sanctioned by the Applicant through a Sanction Letter dated 22.02.2018. Several financing documents were executed, including a Channel Financing Agreement, power of attorney, deed of hypothecation, and letters of guarantee. These documents were intended to secure the loan and enforce the Applicant's rights in case of default. The Corporate Debtor contended that the documents were not properly executed and questioned the validity of the disbursement records.

3. Disbursement and repayment of the loan amount:

The Applicant made disbursements to the Corporate Debtor as per the terms of the financing documents. The Corporate Debtor defaulted on the repayment, leading to the issuance of a legal notice by the Applicant on 22.05.2019, demanding the outstanding amount of INR 3,69,13,981.59/-. The Corporate Debtor argued that no disbursements were made directly to it and questioned the accuracy of the Applicant's financial statements.

4. Compliance with legal and evidentiary requirements:

The Corporate Debtor raised several objections regarding the compliance of the Applicant's documents with legal and evidentiary requirements under the Indian Evidence Act and the Bankers Book of Evidence Act. The Applicant countered these objections by submitting an affidavit under Section 65B of the Indian Evidence Act and clarifying that NBFCs are not covered under the Bankers Book of Evidence Act.

5. Admissibility of the application under Section 7 of IBC:

The Tribunal examined whether the conditions under Section 7 of the IBC were met, including the occurrence of default, completeness of the application, and the absence of disciplinary proceedings against the proposed Interim Resolution Professional (IRP). The Tribunal referred to the decision in Innoventive Industries Limited Vs. ICICI Bank, which clarified that the Adjudicating Authority must admit the application if a default has occurred and the application is complete.

Conclusion:

The Tribunal found that the Corporate Debtor had indeed applied for and received the channel finance facility, and that the Applicant had made disbursements as per the terms of the financing documents. The Tribunal rejected the Corporate Debtor's contentions regarding the validity of the documents and the disbursement process. The Tribunal concluded that the conditions under Section 7 of the IBC were satisfied, including the occurrence of default and the completeness of the application. Consequently, the Tribunal admitted the petition and initiated the CIRP against the Corporate Debtor, appointing Mr. Dhiren Shantilal Shah as the IRP and imposing a moratorium as per Section 14 of the IBC. The Operational Creditor was directed to deposit a fee of INR 2,00,000/- to meet the immediate expenses of the IRP.

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