2022 (4) TMI 1163 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - It is concluded that the FC has established that the Credit facilities were sanctioned and duly disbursed to the CD and there has been default in payment of Debt on the part of the CD - the nature of Debt is a Financial Debt as defined under section 5 (8) of the Code. It has also been established that there is a Default as defined under section 3 (12) of the Code on the part of the Debtor. The two essential qualifications, i.e. existence of 'debt' and 'default', for admission of a petition under section 7 of the I B Code, have been met in this case. It is found that the Petitioner has not received the outstanding amount from the Respondent and that the formalities as prescribed under the Code have been completed by the Petitioner, we are of the conscientious view that this Petition deserves 'Admission' - Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) against a Corporate Debtor for non-payment of dues.
2. Submission of Financial Creditor (FC) regarding default and evidence of debt.
3. Counter-submissions by the Corporate Debtor (CD) challenging the maintainability of the petition.
4. Examination of settlement negotiations and impact on business activities.
5. Analysis of evidence and admission of liability by the CD.
6. Determination of debt default and fulfillment of requirements for admission under the Insolvency and Bankruptcy Code.
7. Appointment of Interim Resolution Professional (IRP) and initiation of CIRP process.

Detailed Analysis:

1. The Company Petition was filed by Bank of India, seeking to initiate CIRP against the Corporate Debtor for non-payment of dues. The FC entered into an Assignment Agreement with JM Financial Asset Reconstruction Company Ltd., transferring all rights and title of financial assets, including the debt owed by the CD. The FC submitted evidence of default, including the amount claimed to be in default and breach of loan agreement by the CD.

2. The CD opposed the petition's maintainability, questioning the authority of the signatory and the sufficiency of stamped documents. The CD also highlighted ongoing settlement negotiations and potential negative impacts on its business if the petition is admitted. The CD submitted an OTS proposal to the Consortium Banks, indicating efforts to settle the dues.

3. The Tribunal observed that the CD's right to reply was closed but subsequently allowed additional submissions. The CD's tactics to delay proceedings in the name of settlement were noted. Eventually, the CD admitted its liability during the hearing, reinforcing the FC's claim of default and debt.

4. After reviewing the submissions, the Tribunal concluded that the FC had established the existence of debt and default, meeting the requirements for admission under the Insolvency and Bankruptcy Code. The Petition was found deserving of admission due to non-receipt of outstanding amounts and completion of prescribed formalities.

5. The Tribunal admitted the Company Petition, appointed an IRP, and ordered the initiation of CIRP against the Corporate Debtor. Various directions were issued, including the deposit of initial CIRP costs, imposition of a moratorium, and the prohibition of certain actions against the CD's assets.

6. The management of the CD was vested in the IRP during the CIRP period, with specific duties outlined to ensure compliance with the Code. The order of moratorium was to remain in effect until the completion of the resolution process or liquidation, as applicable.

7. The Registry was directed to communicate the order to the parties and the IRP promptly, ensuring the initiation of the CIRP process. The judgment highlighted the importance of cooperation from all involved parties and adherence to the Code's provisions throughout the resolution process.