Response to Debt Default Triggers Insolvency Resolution Process | Code Prevails Over Other Laws

The Tribunal found that the Respondent had defaulted in payment of a financial debt, triggering the insolvency resolution process. The Tribunal rejected the challenge to the maintainability of the Petition, emphasizing that the Code's provisions prevail over other laws or instruments. Consequently, the Tribunal allowed the Company Petition, admitted it on contest, appointed an Interim Resolution Professional, declared a moratorium, and directed cooperation from relevant parties to ensure compliance with the Code and facilitate the Corporate Insolvency Resolution Process.

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Issues:
I. Whether the Petition is maintainableRs.
II. Whether the Respondent committed default in payment of a financial debtRs.
III. To what relief, the Petitioner is entitledRs.

Analysis:

Issue No. II:
The Respondent defaulted in payment of a financial debt, which included the principal, interest, maturity premium, default interest, costs, and TDS. The default was evident from the non-payment of due amounts despite notices issued for acceleration and recall. Citing the Innoventive Industries case, the Tribunal affirmed that any non-payment of a debt once it becomes due triggers the insolvency resolution process. Therefore, the Respondent's default in payment of the financial debt was established.

Issue No. I:
The maintainability of the Petition was challenged based on the argument that the Petitioner could have enforced the deed through other means, and the jurisdiction of the Tribunal was barred as per the terms of the Trust Deed. However, the Tribunal clarified that the Code's provisions override any other law or instrument. The purpose of the Code is not merely for recovery but for the revival and continuation of the corporate debtor, ensuring the interests of all stakeholders. The Tribunal held that the parties cannot dictate jurisdiction in violation of the Code's provisions, thus rejecting the contention of lack of jurisdiction raised by the Respondent.

Issue No. III:
Considering the findings, the Tribunal allowed the Company Petition and admitted it on contest. The Tribunal appointed an Interim Resolution Professional (RP) and directed them to take charge of the Respondent's management to initiate the Corporate Insolvency Resolution Process (CIRP). A moratorium was declared, and the Directors, Promoters, or any associated persons were instructed to cooperate with the RP. The Tribunal ordered necessary steps to be taken in accordance with the Code and Rules made thereunder, ensuring compliance and communication between the parties involved.

In conclusion, the Tribunal admitted the Company Petition, initiated the CIRP, appointed an RP, and declared a moratorium on the Respondent, highlighting the importance of following the Code's provisions for a successful resolution process.

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