2020 (10) TMI 541 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditor - existence of debt and dispute or not - HELD THAT - By filing the reply, the Corporate Debtor admits this fact that originally the loan was sanctioned by Kotak Mahindra Bank Limited but subsequently, the loan was restructured as per the SARFAESI and same was done on the request of the Corporate Debtor, which would be evident from Annexure R-3 enclosed with the Rejoinder at page 16 filed by the Financial Creditor. Financial Creditor means a person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred. Here, in this case, we find as per the assignment letter dated 29.09.2017, loan has been assigned to the Applicant by the Kotak Mahindra Bank, the Original Lender, therefore, the Applicant is a Financial Creditor under Section 5(7) of the IBC, 2016 and the outstanding due which the applicant claimed as a Financial Creditor is a financial debt under Section 5(8) of the IBC, 2016 - there are no force in the contention raised on behalf of the Learned Counsel appearing for the Corporate Debtor that the applicant is not a Financial Creditor and the amount which the applicant claimed is not a financial debt, rather, we are of the considered view that applicant is Financial Creditor and the outstanding due which the applicant claimed comes under the definition of financial debt . The Corporate Debtor has taken the loan from the Kotak Mahindra Bank Ltd. which was subsequently assigned by assignment letter dated 29.09.2017 to the applicant and that has not been paid and the documents enclosed with the application as well as the rejoinder shows that there is a default in payment of the said debt - the application is complete - application admitted - moratorium declared.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC, 2016.
2. Validity and completeness of the application filed under Section 7.
3. Alleged concealment of facts and disputes over the amount of default.
4. Validity of loan restructuring and its subsequent revocation.
5. Determination of Financial Creditor status and Financial Debt under IBC, 2016.
6. Application of moratorium under Section 14 of IBC, 2016.
7. Rejection of the Corporate Debtor's application under Section 60(5) of IBC, 2016.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC, 2016:
The application was filed by Suraksha Asset Reconstruction Ltd. as a Financial Creditor to initiate CIRP against Noida Medicare Centre Limited (Corporate Debtor) due to defaults in repayment of credit facilities initially provided by Kotak Mahindra Bank, which were later assigned to Suraksha Asset Reconstruction Ltd. The tribunal found that the Corporate Debtor had committed defaults in repayment, leading to the initiation of CIRP.

2. Validity and completeness of the application filed under Section 7:
The Corporate Debtor argued that the application under Section 7 was incomplete and lacked details of the default amount and date. However, the tribunal noted that the application was complete, and the default amount exceeded the threshold of ?1,00,000, thereby meeting the requirements for initiating CIRP.

3. Alleged concealment of facts and disputes over the amount of default:
The Corporate Debtor claimed that the Financial Creditor concealed the contents of the restructuring letter dated 29.09.2017. The tribunal found that disputes over the default amount are not grounds for rejecting an application under Section 7 if the default amount exceeds the threshold limit. The tribunal also noted that the restructuring and subsequent defaults were adequately documented.

4. Validity of loan restructuring and its subsequent revocation:
The tribunal examined the restructuring agreement dated 29.09.2017 and its revocation on 12.02.2019 due to continued defaults by the Corporate Debtor. The tribunal found that the restructuring was done at the request of the Corporate Debtor and that the revocation was justified due to non-compliance with the restructuring terms.

5. Determination of Financial Creditor status and Financial Debt under IBC, 2016:
The tribunal determined that Suraksha Asset Reconstruction Ltd. qualified as a Financial Creditor under Section 5(7) of the IBC, 2016, as the debt was legally assigned from Kotak Mahindra Bank. The outstanding amount claimed by the Financial Creditor was considered a financial debt under Section 5(8) of the IBC, 2016.

6. Application of moratorium under Section 14 of IBC, 2016:
Upon admitting the application, the tribunal imposed a moratorium under Section 14 of the IBC, 2016, staying all suits, proceedings, and actions against the Corporate Debtor. The moratorium also prohibited the transfer, encumbrance, or disposal of the Corporate Debtor's assets and ensured the supply of essential goods and services during the moratorium period.

7. Rejection of the Corporate Debtor's application under Section 60(5) of IBC, 2016:
The Corporate Debtor's application under Section 60(5) of the IBC, 2016, alleging fraud by the Financial Creditor, was rejected by the tribunal. The tribunal found no merit in the allegations and concluded that the proceedings initiated under Section 7 were maintainable.

Conclusion:
The tribunal admitted the application for initiating CIRP against the Corporate Debtor, imposed a moratorium, and appointed an Insolvency Resolution Professional (IRP). The Corporate Debtor's application under Section 60(5) was rejected, and the tribunal directed the Financial Creditor to deposit the fee for the IRP's immediate expenses. The order was communicated to the IRP and both parties.

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