2019 (6) TMI 1569 - Tri - Insolvency and Bankruptcy

Tribunal grants petition under Insolvency Code, initiates resolution process for corporate debtor

The Tribunal granted the petition filed by a financial creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating Corporate ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Debt or not - account was classified as NPA - time limitation - ex-parte order - HELD THAT:- The petitioner-financial creditor had disbursed money to the respondent-corporate debtor. Though a considerable long period has lapsed the amount due has not been repaid back to the financial creditor- petitioner. It is accordingly held that the respondent-corporate debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees one lakh. After a conjoint reading of Section-7 of the Code along with Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, we are satisfied that a default has occurred and the application under sub section 2 of Section 7 is complete. The name of the IRP has been proposed and there are no disciplinary proceedings pending against the proposed Interim Resolution Professional. Petition admitted - moratorium declared. Issues:1. Claim of financial creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Default in repayment of outstanding financial debt by the corporate debtor.3. Compliance with provisions of Section 7 (2) and Section 7 (5) of IBC.4. Appointment of Interim Resolution Professional and declaration of moratorium.5. Direction for public announcement and deposit by the Financial Creditor.6. Concerns regarding claims of financial creditors and mechanisms for rectification.Analysis:Issue 1 - Claim of Financial Creditor:The Petitioner, a financial creditor, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking Corporate Insolvency Resolution Process against the corporate debtor, supported by documentary evidence of financial facilities provided and defaults in repayment.Issue 2 - Default in Repayment:The corporate debtor admitted to the disbursement of loans and securities but raised a limitation defense, which was refuted by the Financial Creditor with evidence of liability admission by the debtor in subsequent years and a decree in favor of the creditor by the Debts Recovery Tribunal, Lucknow.Issue 3 - Compliance with IBC Provisions:The Tribunal found compliance with Section 7 (2) and Section 7 (5) of the IBC, referencing a previous order in a similar case, confirming the disbursement of funds by the financial creditor and the default in repayment by the corporate debtor.Issue 4 - Appointment of Interim Resolution Professional and Moratorium:The Tribunal admitted the petition, appointed an Interim Resolution Professional, and declared a moratorium as per Section 14 of the Code, outlining exceptions for specific transactions and essential supplies during the moratorium period.Issue 5 - Direction for Public Announcement and Deposit:The Tribunal directed the Interim Resolution Professional to make a public announcement, and the Financial Creditor was instructed to deposit a specified sum to cover expenses, subject to adjustment by the Committee of Creditors.Issue 6 - Concerns Regarding Claims of Financial Creditors:Acknowledging concerns about inflated claims by financial creditors, the Tribunal highlighted the role of Resolution Professionals in addressing such issues to prevent injustice to the corporate debtor.The judgment emphasized the reorganization and resolution focus of the Insolvency and Bankruptcy Code, ensuring protection of the interests of both the corporate debtor and creditors through a transparent resolution process.