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2020 (10) TMI 67 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - The loan has not been repaid by the CD which is due and payable and Hon'ble Supreme Court In M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. 2017 (9) TMI 58 - SUPREME COURT held that there is difference between Section 9 of IBC, 2016 and Section 7 IBC, 2016. The moment it is established that there is a default in payment of Financial debt by the Corporate Debtor, which is due and payable and the application is complete and no disciplinary proceedings is pending against the proposed RP then the Adjudicating Authority has no option but to admit the application. So far dispute is concerned like Section 9 of the IBC, 2016, there is no scope to raise the disputes. Therefore, the averments made in the reply and Written submission of the Corporate Debtor that Financial Creditor has already taken the possession of the immovable property which sale proceed would be sufficient to satisfy the debt is not liable to be accepted. The application is complete and the loan has been disbursed and the same has not been repaid by the Corporate Debtor, therefore there is default in payment of debt, there is no disciplinary proceedings pending against the RP. Application is admitted - moratorium declared.
Issues Involved:
1. Definition of Financial Creditor 2. Existence of Financial Debt 3. Occurrence of Default 4. Adequacy of Security and Realization of Debt 5. Admissibility of Application under Section 7 of IBC Issue-wise Detailed Analysis: 1. Definition of Financial Creditor: The Tribunal examined whether the applicant, The Jammu & Kashmir Bank Ltd. (FC), qualifies as a Financial Creditor under Section 5(7) of the Insolvency & Bankruptcy Code, 2016 (IBC). The FC is a duly incorporated banking company governed by the Banking Regulation Act, 1949. The Tribunal confirmed that the FC meets the definition of a Financial Creditor. 2. Existence of Financial Debt: The Tribunal reviewed the evidence provided by the FC, including multiple sanction letters and loan agreements from 2010 to 2016, which detailed various credit facilities extended to the Corporate Debtor (CD). The FC sanctioned a Term Loan Facility, Cash Credit Facility, and other financial instruments for the development and operation of a steel rolling mill. The Tribunal acknowledged the existence of these financial debts as defined under Section 5(8) of the IBC. 3. Occurrence of Default: The Tribunal considered whether a default had occurred in the payment of the financial debt. The FC demonstrated that the CD's account became irregular, with the last payment made on 15.07.2017. The account was declared a Non-Performing Asset (NPA) on 30.09.2017. The FC issued a Demand Notice on 07.10.2017 and a Loan Recall Notice on 14.03.2019, which were not honored by the CD. The Tribunal found that a default had indeed occurred. 4. Adequacy of Security and Realization of Debt: The CD argued that the FC had taken possession of a property at Mohan Co-operative Industrial Estate, which, if auctioned, would be sufficient to liquidate the debt. The CD also stated that the FC was realizing rent from the property. The Tribunal examined whether taking possession of the property and realizing rent amounts to debt realization. The Tribunal found no legal basis to support the CD's contention that possession and rent realization equate to debt liquidation. The FC's inability to sell the property at the valued price did not negate the occurrence of default. 5. Admissibility of Application under Section 7 of IBC: The Tribunal referred to precedents, including "Swiss Ribbons Pvt. Ltd. vs. Union of India" and "Innoventive Industries Ltd. vs. ICICI Bank," which emphasize the determination of default based on solid documentary evidence. The Tribunal noted that the FC had provided sufficient evidence of default, and the application was complete with no disciplinary proceedings pending against the proposed Resolution Professional (RP). Consequently, the Tribunal admitted the application under Section 7(5)(a) of the IBC. Conclusion: The Tribunal admitted the petition and initiated the Corporate Insolvency Resolution Process (CIRP) against the CD. A moratorium under Section 14 of the IBC was imposed, staying all suits, proceedings, and actions against the CD. Mr. Neeraj Bhatia was appointed as the Interim Resolution Professional (IRP) to take necessary steps as mandated under the Code. The FC was directed to deposit a sum of ?2 lakhs to meet the immediate expenses of the IRP, which would be reimbursed by the Committee of Creditors (CoC) as CIR costs. The Tribunal scheduled further consideration of the case.
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