2022 (8) TMI 544 - 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 - Mere plain reading of the provision under section 7 of IBC shows that in order to initiate CIRP under Section 7 the Applicant is required to establish that there is a financial debt and that a default has been committed in respect of that financial debt. The documents submitted by the Financial Creditor and the Corporate Debtor clearly substantiate the Financial Creditor's claim that the Corporate Debtor has indebted and defaulted in the repayment of loan amount - upon appreciation of the documents placed on record to substantiate the claim, this Tribunal admits this petition and initiates CIRP on the Corporate Debtor with immediate effect. It is pertinent to mention here that the Code requires the adjudicating authority to only ascertain and record satisfaction in a summary adjudication as to the occurrence of default before admitting the application. The material on record clearly goes to show that respondent had availed the credit facilities and has committed default in repayment of the outstanding loan amount. The present application is complete in all respects 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 - Application admitted - moratorium declared.

Issues:
1. Initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016 based on alleged default by the Corporate Debtor.
2. Contentions raised by the Respondent regarding the loan agreement, financial difficulties, and impact of the pandemic on business operations.
3. Examination of documents, arguments, and claims by both parties.
4. Admittance of the application by the Tribunal and appointment of an Interim Resolution Professional.
5. Compliance with statutory requirements, including the appointment of the proposed Interim Resolution Professional.
6. Declaration of default, admission of the application, and imposition of moratorium under Section 14 of the Code.

Analysis:
1. The Applicant filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor for defaulting on a loan amount. The Applicant detailed the transactions leading to the default, including loan disbursement, agreement terms, and subsequent non-payment despite reminders and legal notices.

2. The Respondent contested the application, citing financial difficulties, a request for loan extension due to business losses exacerbated by the pandemic, and a commitment to repay the debt once profitability is achieved. The Respondent argued against the maintainability of the application, highlighting the absence of injury to the Financial Creditor and significant losses suffered by the Respondent.

3. After reviewing the submissions and arguments, the Tribunal noted the admission of the default by the Corporate Debtor, leading to the initiation of the Corporate Insolvency Resolution Process. The Tribunal emphasized the necessity for establishing a financial debt and default under Section 7 of the Code to trigger the CIRP. The documents submitted supported the Financial Creditor's claim of default by the Corporate Debtor.

4. The Tribunal admitted the application, appointed an Interim Resolution Professional, and directed the immediate public announcement of the admission under Section 13(2) of the Code. Additionally, a moratorium was declared under Section 14, imposing restrictions on legal actions against the Corporate Debtor and asset transactions.

5. Compliance with statutory requirements, such as appointing the proposed Interim Resolution Professional, was ensured to satisfy the provisions of the Code. The Tribunal confirmed the completeness of the application, the entitlement of the Financial Creditor to claim the outstanding debt, and the occurrence of default in repayment.

6. The Tribunal emphasized the importance of the Interim Resolution Professional's role in managing the affairs of the Corporate Debtor, ensuring compliance with the Code, and preserving the value of the Debtor's property. The order was communicated to relevant parties, including the Financial Creditor, Corporate Debtor, Interim Resolution Professional, and the Registrar of Companies for public notification.

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