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2022 (1) TMI 975 - Tri - Insolvency and BankruptcyMaintainability 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 - The Financial Creditor instead of extending helping hand, has issued various legal notices to the Corporate Debtor. As a result, the Corporate Debtor could not recover from the lenders hostile attitude. The Corporate Debtor's precarious financial situation compounded further due to the hostile attitude of the Financial Creditor and led to severe cash flow mismatches, which hurt the Corporate Debtor's operations. The hopes of revival also have been severely and adversely impacted since March, 2020 due to Covid-19 outbreak - the Corporate Debtor Company has been particular that the Financial Creditor examines the genuine grievances and addresses its Concerns comprehensively to arrive at an amicable solution to adequately compensate the Corporate Debtor in quick time for the irreparable damage caused to the business and losses incurred that are solely attributable to the acts of omission on the part of the Financial Creditor. Upon reconciliation, the Debt may not exist and therefore, the Petition is not maintainable. The Counsel appearing for the Corporate Debtor reported that though he contacted by his client, his client did not give any instructions to him and he sought the Tribunal to pass orders on merits. He did not make any submissions either opposing the submissions made by the Counsel for the Financial Creditor or in support of the contentions made in his counter - application admitted - moratorium declared.
Issues Involved:
Initiation of Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor for default in payment. Detailed Analysis: Issue 1: Default in Payment The State Bank of India, as the Financial Creditor, filed an application seeking initiation of Corporate Insolvency Resolution Process (CIRP) against M/s. Ethnic Tobacco (India) Limited, the Corporate Debtor, for defaulting on a payment of ?137,68,37,255.53. The Financial Creditor invoked Section 7 of the Insolvency and Bankruptcy Code, 2016, alleging non-payment of dues despite various loans and working capital facilities provided to the Corporate Debtor. Issue 2: Financial Assistance and Loan Facilities The Financial Creditor, a Commercial Bank, sanctioned credit facilities to the Corporate Debtor upon the latter's request for financial assistance and working capital loan facilities. Various agreements were executed between the Corporate Debtor and the Financial Creditor for availing financial assistance, leading to the Corporate Debtor's default in repayment despite multiple reminders. Issue 3: Allegations and Counter-Statements The Corporate Debtor contended that it had made payments totaling ?300.41 Crore towards interest and bank charges until its account was declared as Non-Performing Asset (NPA). The Corporate Debtor attributed its financial distress to a global commodities price crash, resulting in insufficient stocks to support its financial exposure to the Financial Creditor, exacerbated by the hostile attitude of the latter. Issue 4: Adjudication and Decision After hearing arguments from both parties, the Tribunal found merit in the Financial Creditor's application and admitted it for initiating the Corporate Insolvency Resolution Process against the Corporate Debtor. An Insolvency Resolution Professional (IRP) was appointed to oversee the resolution process, and a moratorium was declared in respect of the Corporate Debtor as per the provisions of the Insolvency and Bankruptcy Code, 2016. Conclusion: The Tribunal's decision to admit the application for CIRP against the Corporate Debtor was based on the default in payment, the Financial Creditor's claims, and the failure of the Corporate Debtor to address the outstanding dues adequately. The appointment of an IRP and declaration of a moratorium signify the initiation of the resolution process to address the financial distress and non-payment issues between the parties involved.
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