2018 (6) TMI 1702 - Tri - Insolvency and Bankruptcy

Tribunal Admits Insolvency Application, Initiates Resolution Process

The tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the corporate insolvency resolution process ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The financial creditor has filed the rejoinder wherein all the pleas/objections taken by the corporate debtor/guarantor have been controverted and has submitted that since the debt is due and payable, and the same is not interdicted by some law, the same is payable and it is of no matter that the debt is disputed so long as the debt is due - the record/evidence that has been mentioned is sufficient to ascertain the existence of default on the part of the corporate debtor/guarantor. On the issue that there is no sanction/approval of RBI due to which the 'corporate guarantee' in question is not enforceable is stated to be wholly vague and baseless because as per article 3 of the loan agreement, the corporate debtor/guarantor assured the financial creditor of its ability to provide such guarantee in accordance with the applicable law and regulations. Therefore, the corporate debtor/guarantor cannot hide itself behind its own failure to obtain any required approval to wriggle out of its liability or consequences of default - further, the failure on the part of the corporate debtor/guarantor to obtain such approval, does not impinge upon the validity of the guarantee issued. The application of the financial creditor is complete in all respect - application admitted - moratorium declared. Issues Involved:1. Maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Existence of debt and default by the corporate debtor.3. Validity and enforceability of the 'deed of guarantee.'4. Requirement of approval from the Reserve Bank of India (RBI).5. Applicability of the limitation period.6. Appointment of Interim Resolution Professional (IRP).7. Declaration of moratorium.Issue-wise Detailed Analysis:1. Maintainability of the Application:The corporate debtor argued that the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 is neither maintainable in law nor on facts, alleging suppression of material facts and misrepresentation by the financial creditor. However, the tribunal found the application complete in all respects and dismissed the objections raised by the corporate debtor.2. Existence of Debt and Default:The financial creditor claimed an outstanding amount of USD 19,57,441, which the corporate debtor failed to pay. The tribunal reviewed the loan agreement and the 'deed of guarantee,' along with various email communications and documents, concluding that there was a default on the part of the corporate debtor.3. Validity and Enforceability of the 'Deed of Guarantee':The tribunal examined the 'deed of guarantee' executed by the corporate debtor, which assured repayment of the loan amount. The deed was found to be independent and distinct from any other security, and the corporate debtor was held liable for the outstanding amount. The tribunal rejected the corporate debtor's argument that the guarantee was conditional on the transfer of shares.4. Requirement of Approval from RBI:The corporate debtor contended that the 'deed of guarantee' was null and void due to the lack of RBI approval. The tribunal dismissed this argument, stating that the corporate debtor assured the financial creditor of its ability to provide the guarantee in compliance with applicable laws and regulations. The failure to obtain RBI approval did not affect the validity of the guarantee.5. Applicability of the Limitation Period:The corporate debtor argued that the application was barred by limitation. The tribunal referred to the judgment of the National Company Law Appellate Tribunal, which held that the Insolvency and Bankruptcy Code, 2016 does not suggest that limitation is applicable. Thus, the tribunal rejected the limitation argument.6. Appointment of Interim Resolution Professional (IRP):The financial creditor proposed the name of Ms. Aishwarya Mohan Gahrana as the IRP, and her consent was obtained in Form 2. The tribunal appointed her as the IRP, finding no disciplinary proceedings pending against her.7. Declaration of Moratorium:The tribunal declared a moratorium effective from the date of the order until the completion of the corporate insolvency resolution process. The moratorium prohibited the institution or continuation of suits, transferring or disposing of assets, and recovery actions against the corporate debtor. Essential goods or services to the corporate debtor were not to be terminated or suspended during the moratorium period.Conclusion:The tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the corporate insolvency resolution process against the corporate debtor. Ms. Aishwarya Mohan Gahrana was appointed as the IRP, and a moratorium was declared. The corporate debtor's objections were dismissed, and the financial creditor's claims were upheld.