2021 (8) TMI 109 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - This Bench is of the view that the Corporate Debtor in its reply has clearly stated that due to poor business performance across the hospitality sector coupled with other financial obligations such as payment of salaries of employees etc. lead to unintentional delay in payment of EMIs. He has added that he is still desirous and willing to clear the outstanding dues of the Applicant. . Evidently, the Corporate Debtor has admitted its inability/liability to pay the dues and default committed. This Bench is, therefore, inclined to initiate the CIR Process against the Corporate Debtor. The present Petition being complete and having established the default in payment of the Financial Debt for the default amount being committed above the threshold limit, the present Petition is admitted in terms of Section 7(5) of the IBC and accordingly, moratorium is declared in terms of Section 14 of the Code - Petition admitted - moratorium declared.

Issues:
1. Initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Default in repayment of financial debt by the Corporate Debtor.
3. Admission of liability by the Corporate Debtor.
4. Appointment of an Interim Resolution Professional (IRP) and initiation of Corporate Insolvency Resolution Process (CIRP).

Issue 1: Initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The petition was filed under Section 7 of the IBC, 2016 by the Financial Creditor to initiate the Corporate Insolvency process against the Corporate Debtor. The Financial Creditor had entered into a Loan Agreement with the Corporate Debtor, extending a loan amount for a specified period. Despite initial payments being made on time, the Corporate Debtor failed to clear subsequent EMIs, leading to default. The Financial Creditor submitted evidence of the outstanding amount and non-payment, including emails and a Loan Recall cum Demand Notice. The Corporate Debtor, in response, cited financial constraints due to poor business performance and the impact of COVID-19, expressing willingness to clear dues but inability to do so.

Issue 2: Default in repayment of financial debt by the Corporate Debtor:
The Corporate Debtor admitted to defaulting on multiple consecutive EMIs, leading to a total outstanding amount against them. The Financial Creditor provided documentation supporting the default, including the Loan Agreement, bank statements, and communication between the parties. The Corporate Debtor acknowledged the delay in payments but attributed it to financial difficulties arising from poor business performance and the broader economic impact of COVID-19. The Tribunal found the Corporate Debtor liable for the default and initiated the Corporate Insolvency Resolution Process based on the established default in payment of the financial debt.

Issue 3: Admission of liability by the Corporate Debtor:
The Corporate Debtor, in its reply, admitted to the unintentional delay in payment of EMIs due to financial constraints resulting from poor business performance in the hospitality sector and the effects of COVID-19. Despite acknowledging the default, the Corporate Debtor expressed willingness to clear the outstanding dues. This admission of liability by the Corporate Debtor played a crucial role in the Tribunal's decision to initiate the Corporate Insolvency Resolution Process against them.

Issue 4: Appointment of an Interim Resolution Professional (IRP) and initiation of Corporate Insolvency Resolution Process (CIRP):
After considering the submissions of both parties, the Tribunal concluded that the Corporate Debtor's admission of inability to pay and default warranted the initiation of the Corporate Insolvency Resolution Process. Consequently, the Tribunal admitted the petition under Section 7(5) of the IBC, declared a moratorium, and imposed prohibitions as per Section 14 of the Code. The Tribunal appointed an Interim Resolution Professional, directing them to take charge of the Corporate Insolvency Resolution Process and manage immediate expenses. The Financial Creditor was instructed to deposit a specified amount with the IRP, subject to adjustment by the Committee of Creditors. The Tribunal communicated its order to the parties involved and forwarded a copy to the Insolvency and Bankruptcy Board of India (IBBI) for record-keeping.

This detailed analysis of the judgment highlights the key issues addressed by the Tribunal, including the initiation of the Corporate Insolvency Resolution Process, default in repayment of financial debt, admission of liability by the Corporate Debtor, and the subsequent appointment of an Interim Resolution Professional to oversee the resolution process.

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