2021 (1) TMI 509 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in repayment of outstanding dues - existence of debt and dispute or not - HELD THAT - In view of the categorical admission made by the corporate debtor as regards to the debt and the default and further proposal that he made with the petitioner, the petition can be admitted if they do not settle the matter with the bank amicably, time is granted for a period of 3 weeks to afford a last chance to the corporate debtor. It is made very very clear to the corporate debtor that no further adjournments will be granted and if the petitioner does not report to the court that the matter has been amicably settled between the parties, the orders will be pronounced in the open court on the very same day forthwith. List this matter on July 16, 2019. A categorical statement made by the corporate debtor that an investor, i. e. Prudent ARC Ltd., is prepared to invest ₹ 100 crores and prepared to settle the dues - HELD THAT - In view of the failure on the part of the corporate debtor to make payment the investment of ₹ 5 crores made by the said Prudent ARC Ltd., has to be repaid by the applicant-bank. Counsel representing the applicant-bank submits that in the event the petition is admitted they shall refund the said amount of ₹ 5 crores forthwith to the said Prudent ARC Ltd. - In view of the clear admission made by the corporate debtor towards debt and default, the petition requires to be admitted. The matter is reserved for further detailed order. The corporate debtor despite availing number of adjournments has neither filed reply nor advanced any arguments. Therefore, it is very clear from the conduct of the corporate debtor that the corporate debtor has no arguable case in the above company petition. Therefore the main company petition is reserved for orders - It is very clear from the above orders and the conduct of the corporate debtor that the corporate debtor is clearly admitting the debt and default in the above company petition and has no arguable defence. Even otherwise the financial creditor produced all the documents establishing the debt and default. The financial creditor also furnished the name of Mr. Sunil Kumar Chaudhari as the proposed interim resolution professional along with his letter of consent and also his undertaking that there are no disciplinary proceedings pending against him. This Tribunal has no hesitation in holding that the financial creditor has proved all the necessary legal ingredients for admitting the above company petition and the above company petition is liable to be admitted. Initiation of CIRP ordered - petition allowed.

Summary

Issues:
1. Application filed by financial creditor under section 7 of the Insolvency and Bankruptcy Code, 2016 for initiating corporate insolvency resolution process due to default in repayment of dues.
2. Failure of corporate debtor to repay outstanding dues despite multiple notices and invocation of pledges.
3. Lack of substantial defense by the corporate debtor in response to the petition.
4. Appointment of interim resolution professional and imposition of moratorium.

Issue 1: Application under Section 7 of the Insolvency and Bankruptcy Code:
The financial creditor filed an application under section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the corporate insolvency resolution process against the corporate debtor due to default in repayment of outstanding dues amounting to ?129,23,00,000. The creditor issued notices to the debtor demanding repayment, but the debtor failed to comply, leading to the application before the Tribunal.

Issue 2: Failure of Corporate Debtor to Repay Dues:
Despite receiving multiple recall notices and a pledge invocation notice, the corporate debtor and guarantors did not repay the outstanding dues to the financial creditor. The Tribunal noted the debtor's failure to respond adequately or settle the matter, indicating a lack of willingness or ability to fulfill the financial obligations owed to the creditor.

Issue 3: Lack of Substantial Defense by Corporate Debtor:
Throughout the proceedings, the corporate debtor failed to file replies or present substantial arguments in defense of the outstanding dues. The Tribunal highlighted the numerous adjournments sought by the debtor's counsels without filing replies, indicating a lack of a strong case or defense to contest the creditor's claims. The Tribunal emphasized the debtor's clear admission of debt and default, further weakening any potential defense.

Issue 4: Appointment of Interim Resolution Professional and Imposition of Moratorium:
Based on the evidence presented by the financial creditor, including documents establishing the debt and default, the Tribunal found merit in admitting the company petition and initiating the corporate insolvency resolution process against the corporate debtor. Consequently, the Tribunal appointed an interim resolution professional and imposed a moratorium, prohibiting various actions against the debtor, ensuring the continuity of essential services, and outlining the management structure during the resolution process.

This comprehensive analysis of the judgment outlines the key issues addressed by the Tribunal, including the application under the Insolvency and Bankruptcy Code, the failure of the corporate debtor to repay dues, the lack of a substantial defense, and the consequential appointment of an interim resolution professional and imposition of a moratorium to facilitate the corporate insolvency resolution process.