2018 (8) TMI 1949 - Tri - Insolvency and Bankruptcy

Tribunal Admits Company Petition for Insolvency Resolution Process

The Tribunal admitted the Company Petition, initiating the Corporate Insolvency Resolution Process against the Corporate Debtor due to defaults in loan ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- The basic factors with regard to disbursement of loans in question; debt and default, are not in dispute except with regard to delay in disbursement of loan in question, further funding etc. Therefore, the Adjudicating Authority has to examine, whether the instant Company Petition is filed in accordance with the provisions of 7 of the Insolvency and Bankruptcy Code, 2016 or not. The Adjudicating Authority/ Tribunal has to examine the instant case with regard to default, Application/ petition is complete/ incomplete, such default is supported by evidence; and has named Interim Resolution Professional. The instant Company Petition is filed by Axis Bank (Financial Creditor) strictly in accordance with provisions of Section 7 of Code by interalia producing record of default as per the Bank Statement; suggested Mr. Sundaresh Bhat, as Interim Resolution Professional , who has filed Written Communication, under Rule 9 of I & B(AAA) Rules, 2016 by interalia declaring that he is a qualified Insolvency Resolution Professional Registered with IBBI/IPA-OOI/IPP00077-18/ 10162 and he is not undergoing any disciplinary proceedings, expressing willingness to act as such etc. Application is admitted - moratorium is declared. Issues Involved:1. Default in repayment of loans by the Corporate Debtor.2. Allegations of fraudulent and malicious intent by the Financial Creditor.3. Jurisdiction and authority of the Tribunal.4. Compliance with the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC).5. Validity and enforceability of the loan agreements and related documents.6. Requests for additional funding and alleged delays in disbursement.7. Allegations of manipulation and falsification of accounts by the Financial Creditor.8. Admissibility and relevance of evidence and documents presented.9. Commercial solvency of the Corporate Debtor.10. Requests for dismissal of the Company Petition under Section 65 of the IBC.Detailed Analysis:1. Default in Repayment of Loans by the Corporate Debtor:The Financial Creditor, Axis Bank, sought to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Lotus Shopping Centres Private Limited, under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Financial Creditor provided details of two loan facilities, Axis Facility 1 and Axis Facility 2, with respective default amounts of Rs. 147,78,03,498 and Rs. 53,75,62,371. The initial dates of default were 15th April 2017 and 30th April 2017, respectively. The Corporate Debtor acknowledged the debt by letter dated 26th April 2017.2. Allegations of Fraudulent and Malicious Intent by the Financial Creditor:The Corporate Debtor alleged that Axis Bank filed the petition with malafide intentions and ulterior motives, suppressing material facts and violating various regulations of the Reserve Bank of India (RBI). They contended that the Bank manipulated the statement of accounts and indulged in fraudulent practices to maximize revenue through interest charges. The Corporate Debtor also claimed that the Bank delayed the funding and made untenable demands, causing the project to halt and resulting in significant financial losses.3. Jurisdiction and Authority of the Tribunal:The Corporate Debtor challenged the jurisdiction of the Tribunal, arguing that it is not a Court of Record and cannot pass a judgment in rem declaring any entity as insolvent. They filed writ petitions and a civil suit seeking damages from the Bank. However, the Tribunal, guided by the Hon'ble Supreme Court and NCLAT judgments, affirmed its authority to adjudicate the matter under the IBC.4. Compliance with the Provisions of the Insolvency and Bankruptcy Code, 2016 (IBC):The Tribunal examined whether the petition was filed in accordance with Section 7 of the IBC. The Financial Creditor provided evidence of default, named an Interim Resolution Professional (IRP), and complied with the procedural requirements. The Tribunal found that the petition met the criteria for admission under the IBC.5. Validity and Enforceability of the Loan Agreements and Related Documents:The loan agreements between the Financial Creditor and the Corporate Debtor contained terms and conditions for the disbursement and repayment of loans. The Tribunal reviewed these agreements, including the term loan agreement dated 2nd January 2013 and subsequent amendments. The Corporate Debtor's objections to the validity of these documents were not upheld by the Tribunal.6. Requests for Additional Funding and Alleged Delays in Disbursement:The Corporate Debtor argued that Axis Bank delayed the disbursement of funds and refused additional funding, which adversely affected the project. They cited RBI guidelines on project funding and claimed that the Bank's actions led to the project's failure. The Tribunal, however, focused on the default in repayment and found that the Bank's actions did not negate the occurrence of default.7. Allegations of Manipulation and Falsification of Accounts by the Financial Creditor:The Corporate Debtor accused Axis Bank of manipulating accounts and using blank signatures to create false documents. They claimed that the Bank's actions were fraudulent and violated RBI guidelines. The Tribunal, however, did not find sufficient evidence to support these allegations and focused on the established defaults in repayment.8. Admissibility and Relevance of Evidence and Documents Presented:The Tribunal considered various documents, including the statement of accounts, loan agreements, and correspondence between the parties. The Financial Creditor provided a Banking Certificate under the Bankers Book Evidence Act, 1891, and/or the Information Technology Act, 2000, to support their claims. The Tribunal found the evidence presented by the Financial Creditor to be credible and relevant.9. Commercial Solvency of the Corporate Debtor:The Corporate Debtor argued that they were commercially solvent, with surplus assets over liabilities and ongoing projects. They provided unaudited balance sheets and other financial documents to support their claim. However, the Tribunal emphasized that the primary test under the IBC is the occurrence of default, not the commercial solvency of the debtor.10. Requests for Dismissal of the Company Petition under Section 65 of the IBC:The Corporate Debtor filed an application under Section 65 of the IBC, seeking dismissal of the petition on grounds of malicious intent and fraudulent initiation. The Tribunal found that the petition was filed in compliance with the IBC and that the allegations of malice were not substantiated. Consequently, the application under Section 65 was rejected.Conclusion:The Tribunal admitted the Company Petition, initiating the CIRP against the Corporate Debtor. Mr. Sundaresh Bhat was appointed as the Interim Resolution Professional. A moratorium was declared, prohibiting suits, asset transfers, and other actions against the Corporate Debtor. The Tribunal directed the IRP to follow the provisions of the IBC and file progress reports. The application under Section 65 of the IBC was rejected, and the Tribunal concluded that the petition was filed in accordance with the law.