2022 (3) TMI 234 - 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 - time limitation - HELD THAT - The Financial Creditor has invested its money for a project and the corporate debtor has failed to complete the project and infact changed the entire project into another type of project. Therefore, it is well within the rights of the financial creditor to recall its financial debt as the project is not the same. In view of the documents placed on record, the financial creditor proved that financial debt was given to the corporate debtor and the corporate debtor has defaulted in repayment of said financial debt. An application under Section 7 of the Code is acceptable so long as the debt is proved to be due and there has been occurrence or existence of default. What is material is that the default is for at least ₹ 1 Lakh. In view of Section 4 of the Code, the moment default is of Rupees one lakh or more, the application to trigger Corporate Insolvency Resolution Process under the Code is maintainable. The corporate debtor has failed to show that there is no debt or default in existence so as to avoid the provisions of the Code. The applicant has also placed copies of Form- 26AS showing deposit of TDS on interest over financial debt deposited by the corporate debtor. In the facts it is seen that the applicant clearly comes within the definition of Financial Creditor. The material placed on record further confirms that applicant financial creditor had provided financial facility to the respondent corporate debtor and the respondent acknowledged the same debt in its Balance Sheets and committed default in repayment of the outstanding financial debt. On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same - the present application is complete in all respect and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been default in payment of the financial debt. In terms of Section 7 (5) (a) of the Code, the present application is here admitted - Moratorium declared.

Summary

Issues Involved:
1. Application for rejection of the main Insolvency and Bankruptcy (IB) petition.
2. Allegations of fraudulent and malicious invocation of the Insolvency and Bankruptcy Code (IBC).
3. Validity and acknowledgment of financial debt.
4. Appointment of Interim Resolution Professional (IRP).
5. Declaration of moratorium.

Detailed Analysis:

1. Application for rejection of the main IB petition:
The shareholders and a Director of the Corporate Debtor filed IA 3626/ND/2021 under Section 65 of the Insolvency and Bankruptcy Code, 2016, seeking rejection of the main IB petition CP (IB) No. 983 of 2020 filed by the financial creditor. The Tribunal decided to dispose of the main IB petition and the IA by a common order due to their interrelation.

2. Allegations of fraudulent and malicious invocation of the IBC:
The applicants claimed that the financial creditor and its group, who are also shareholders in the Corporate Debtor, breached partnership principles and invoked the provisions of the IBC fraudulently and maliciously. They alleged that the financial creditor created fraudulent documents to initiate false proceedings and filed a police complaint against the financial creditor for fabricating documents.

3. Validity and acknowledgment of financial debt:
The financial creditor provided margin money in the form of Fixed Deposit Receipts (FDRs) to the Corporate Debtor for a project, which was acknowledged in the Corporate Debtor’s balance sheets for the financial years 2012-2013 to 2016-2017. Despite a recall demand notice dated 16.03.2020, the Corporate Debtor failed to repay the loan and interest. The Tribunal found that the financial creditor had invested in a project that the Corporate Debtor failed to complete and changed into another project, justifying the recall of the financial debt.

4. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Ashish Singh as the Interim Resolution Professional (IRP) for the Corporate Debtor, with registration number IBBI/IPA-002/IPN0004167/2017-18/11230. The financial creditor was directed to deposit ?2 Lakhs with the IRP to cover the expenses for performing his functions.

5. Declaration of moratorium:
The Tribunal declared a moratorium in terms of Section 14 of the IBC, imposing prohibitions on the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of any assets, enforcing any security interest, and recovering any property by an owner or lessor. The moratorium does not apply to transactions notified by the Central Government or the supply of essential goods or services to the Corporate Debtor.

Conclusion:
The Tribunal dismissed IA 3626/ND/2021, finding no merit in the application. The main IB petition filed under Section 7 of the IBC was admitted, as the financial creditor proved the existence of financial debt and default by the Corporate Debtor. The Tribunal directed the IRP to perform his functions in accordance with the IBC provisions and communicate the order to relevant parties.