2022 (10) TMI 520 - 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 - time limitation - HELD THAT - It is established that the Corporate Debtor is liable to pay the Petitioner and it has defaulted in making the payment to the Petitioner. Considering the facts, it is concluded that 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. Besides, the Company Petition is well within the period of limitation. It is clear that the Corporate Debtor has defaulted in repayment of debt. Hence, owing to the inability of the Corporate Debtor to pay its dues, this is a fit case to be admitted u/s 7 of the I B Code - the Corporate Debtor having admitted their liability in the earlier Company Petition 45 of 2020 through Consent Terms is estopped from disputing of the existence of debt and default since this Company Petition is nothing but second round of litigation in respect of same debt and default. It is found that the Petitioner has not received the outstanding debt from the Corporate Debtor and that the formalities as prescribed under the code have been completed by the Petitioner, and thus this Petition deserves Admission - petition admitted - moratorium declared.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Nature of Debt and Default
3. Admissibility of the Petition
4. Role and Actions of the Debenture Trustee
5. Consent Terms and Default Notice
6. Appointment of Interim Resolution Professional (IRP)
7. Moratorium and its Implications

Issue-wise Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Petitioner, IREP Credit Capital Private Limited, sought to initiate CIRP against Rajesh Landmark Projects Private Limited under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, for an unresolved financial debt amounting to Rs. 26,96,49,413. The debt included redemption of debentures, redemption premium, penal interest, and interest.

2. Nature of Debt and Default:
The Tribunal established that the debt qualifies as a "Financial Debt" under Section 5(8) of the Code and that a "Default" under Section 3(12) of the Code had occurred. The Corporate Debtor defaulted on payments due for the quarter ending 30.09.2019 and subsequent payments. The Petitioner provided evidence of the default, including the Debenture Trust Deed (DTD), Supplemental DTD, and other documents.

3. Admissibility of the Petition:
The Tribunal found that the essential qualifications for admission of the petition under Section 7 of the IBC, i.e., existence of debt and default, were met. The petition was also within the period of limitation. The Corporate Debtor's liability and default were acknowledged in the Consent Terms dated 14.10.2020, which were taken on record by the Tribunal.

4. Role and Actions of the Debenture Trustee:
The Respondent argued that the Debenture Trustee could only act on "Approved Instructions" from the Debenture Holders and that no Default Notice was issued by the Trustee. The Petitioner countered that the Trustee had acknowledged the default and advised legal action. The Tribunal noted that the Debenture Trustee, under its discretion, directed the Petitioner to take legal action, confirming the default.

5. Consent Terms and Default Notice:
The Respondent contended that the Consent Terms did not eliminate the requirement for a Default Notice as per Clause 9.2 of the DTD. The Petitioner argued that the Respondent had accepted liability and default in the Consent Terms. The Tribunal found that the Respondent's admission of liability in the Consent Terms estopped them from disputing the debt and default.

6. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Bhrugesh Amin as the Interim Resolution Professional (IRP) to conduct the CIRP. The Petitioner was directed to deposit Rs. 5 Lakhs towards initial CIRP costs. The IRP was tasked with managing the Corporate Debtor during the CIRP period.

7. Moratorium and its Implications:
The Tribunal ordered a moratorium prohibiting the institution or continuation of suits against the Corporate Debtor, transferring or disposing of assets, and recovery actions. The supply of essential goods or services to the Corporate Debtor was to continue uninterrupted. The moratorium would remain effective until the completion of the CIRP or approval of a resolution plan.

Conclusion:
The Tribunal admitted the petition for initiating CIRP against Rajesh Landmark Projects Private Limited, appointed an IRP, and ordered a moratorium. The Corporate Debtor's default and liability were established, and the petition met the requirements under the IBC.