2021 (2) TMI 464 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - corporate debtor committed default in making repayment of the loan facility availed by it from the financial creditor - Financial Creditor or not - existence of debt and default or not - HELD THAT - There is a force in the submissions made by the petitioner with regard to the relevant factors to be looked into by the Adjudicating Authority in admitting the company petition. As rightly contended by the petitioner the Adjudicating Authority has to merely look into the existence of debt and default for admitting a Company Petition under Section 7 of the code as per law laid down by Hon ble Supreme Court in various judgments. When once the debt and default is proved the company petition has to be admitted. Even otherwise the petitioner successfully demonstrated before this Tribunal that the subject matter of the vessels could not be disposed of by the financial creditor on account of their own mishandling of the financial affairs of the corporate debtor accumulating the losses and maritime liens on the vessels. Mr. Rohan Rajadhyaksha also fairly conceded that the financial creditor has no objection for excluding the sale proceeds of the vessel MT Premmala presently lying with the Bombay High Court in the pending appeal filed by State Bank of India from the purview of the CIRP process of this Company Petition - there are no merits in any of the contentions raised by the Corporate Debtor as they are beyond the scope of Section 7 of the Code. Application admitted - moratorium declared.

Issues Involved:
1. Default in repayment of loan facilities by the Corporate Debtor.
2. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.
3. Allegations of malafide intention and mismanagement by the Financial Creditor.
4. Non-disclosure of the capsizing of a vessel by the Financial Creditor.
5. Appointment of an Interim Resolution Professional (IRP).
6. Implementation of a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Default in Repayment of Loan Facilities by the Corporate Debtor:
The Financial Creditor (ICICI Bank) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor (Mercator Ltd.) for defaulting on loan repayments. The Corporate Debtor defaulted on four facilities sanctioned between 2014 and 2016, aggregating to USD 47 million. The insolvency application was based on defaults under two facilities extended in December 2016, totaling USD 12 million. The Corporate Debtor was irregular in servicing its debt obligations from February 28, 2019, and the account was classified as a Non-Performing Asset on May 21, 2019. Despite notices of recall issued by the Financial Creditor, the Corporate Debtor continued to default, leading to the initiation of CIRP.

2. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Financial Creditor sought to initiate CIRP against the Corporate Debtor due to persistent defaults in repayment. The tribunal emphasized that the existence of debt and default are the primary factors to consider for admitting a petition under Section 7. The tribunal found that the Financial Creditor successfully demonstrated the existence of debt and default, fulfilling the requirements for initiating CIRP.

3. Allegations of Malafide Intention and Mismanagement by the Financial Creditor:
The Corporate Debtor alleged that the petition was filed with malafide intentions to hinder and wrongfully avail the assets of other secured creditors. It contended that the Financial Creditor failed to take timely steps to protect and realize the value of the mortgaged vessels, leading to their depreciation. The tribunal found no merit in these contentions, noting that the Financial Creditor had taken steps to sell the dredgers and that the delays were due to non-cooperation by the Corporate Debtor.

4. Non-disclosure of the Capsizing of a Vessel by the Financial Creditor:
The Corporate Debtor argued that the Financial Creditor did not disclose the capsizing of the vessel Tridevi Prem, which should lead to dismissal under Section 75 of IBC. The tribunal dismissed this contention, stating that a Section 7 application requires only the submission of an application in the prescribed format, not a detailed plaint.

5. Appointment of an Interim Resolution Professional (IRP):
The tribunal appointed Mr. Girish Siriram Juneja as the Interim Resolution Professional (IRP) to carry out the functions as mentioned under the Insolvency & Bankruptcy Code. The Financial Creditor was directed to deposit INR 5 lakh towards the initial CIRP cost.

6. Implementation of a Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016:
The tribunal ordered a moratorium prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of assets, and other actions to recover or enforce security interests. The moratorium will be effective until the completion of the CIRP or until a resolution plan is approved or liquidation is ordered. The tribunal also excluded the sale proceeds of the vessel 'MT' Premmala from the CIRP process and mandated the continuation of essential goods or services to the Corporate Debtor during the moratorium period.

Conclusion:
The tribunal admitted the petition and ordered the initiation of CIRP against the Corporate Debtor. The management of the Corporate Debtor will vest in the IRP, and the suspended directors and employees must cooperate with the IRP. The tribunal directed the Registrar of Companies, Mumbai, to update the master data of the Corporate Debtor and communicated the order to both parties and the IRP. The interlocutory application was disposed of in light of the final order.

← Previous Next →