2021 (10) TMI 938 - 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 - Based upon the Loan Agreement dated 05.07.2013, the Financial Creditor has disbursed money to the Corporate Debtor at different intervals and the outstanding debt was also acknowledged by the Corporate Debtor at the end of each financial year. It is also seen from the said acknowledgment, the Corporate Debtor has expressly stated that they have outstanding balance in respect of 'unsecured loan amount'. All these documents go on to show that there is a 'financial debt' and the Corporate Debtor has committed 'default' in repayment of the said 'financial debt' to the Financial Creditor. It is also seen that the 'default' which is arising in the present Application has happened much before the advent of Covid - 19 and the Corporate Debtor also cannot seek shelter under Section 10A of IBC, 2016. Under these circumstances, this Tribunal is left with no other option than to proceed with the present case and initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor. Petition allowed - moratorium declared.

Issues:
Application under Section 7 of the Insolvency & Bankruptcy Code, 2016 to initiate Corporate Insolvency Resolution Process against the Corporate Debtor.

Analysis:
1. The Application was filed by the Financial Creditor against the Corporate Debtor seeking to initiate the Corporate Insolvency Resolution Process under Section 7 of the Insolvency & Bankruptcy Code, 2016. The Financial Creditor claimed a sum of ?2,55,92,043/- due and payable by the Corporate Debtor. The Financial Creditor proposed the name of the Interim Resolution Professional (IRP) to act in this matter.

2. The Financial Creditor had acquired the stakes of another company and subsequently amalgamated it with the Financial Creditor, including the assets and liabilities, which included the amount receivables from the Corporate Debtor. An unsecured loan was granted to the Corporate Debtor, and despite repeated reminders and demands, the outstanding debt of ?2,55,92,043/- remained unpaid.

3. The Corporate Debtor did not show any progress in business activities, leading to the Financial Creditor initiating the insolvency process. The Corporate Debtor was set ex parte as they did not respond to the proceedings. The Loan Agreement between the parties acknowledged the financial debt owed by the Corporate Debtor to the Financial Creditor.

4. The Tribunal found that a significant portion of the disbursed amount constituted a financial debt, while a part was for operational expenses and not categorized as financial debt. The Corporate Debtor had acknowledged the outstanding debt in various documents, confirming the existence of a financial debt and default on repayment.

5. The Tribunal noted that the default occurred before the onset of Covid-19, and the Corporate Debtor could not seek protection under Section 10A of the Insolvency & Bankruptcy Code, 2016. Consequently, the Tribunal decided to proceed with the case and initiate the Corporate Insolvency Resolution Process against the Corporate Debtor.

6. The Tribunal admitted the Application under Section 7 of the Code, leading to the imposition of a moratorium as per Section 14(1) of the Code. The moratorium included restrictions on legal proceedings, asset disposal, and recovery actions against the Corporate Debtor. Essential supplies to the Corporate Debtor were to be maintained during the moratorium period.

7. The Interim Resolution Professional (IRP) appointed was tasked with furthering the Corporate Insolvency Resolution Process and required to file a report within 20 days. The powers of the Board of Directors of the Corporate Debtor were superseded upon initiation of the CIRP. The Tribunal communicated the Order to all relevant parties and authorities for compliance and record-keeping purposes.

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