Tribunal admits Financial Creditor's application under Insolvency and Bankruptcy Code. Corporate Insolvency Resolution Process initiated.

The Tribunal admitted the application filed by the Financial Creditor under the Insolvency and Bankruptcy Code against the Corporate Debtor. The objections raised by the Corporate Debtor were deemed meritless, leading to the initiation of the Corporate Insolvency Resolution Process, imposition of a moratorium, and appointment of an Interim Resolution Professional.

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Issues Involved:

1. Authorization to file the application.
2. Existence and default of financial debt.
3. Jurisdiction of the Tribunal.
4. Validity of Master Credit Agreement.
5. Applicability of Insolvency and Bankruptcy Code to pending loans and trust properties.
6. Capitalization of penal interest.

Issue-wise Detailed Analysis:

1. Authorization to file the application:

The Corporate Debtor argued that the Financial Creditor was not properly authorized to file the application, as no board resolution was submitted. However, the Tribunal found that the Senior Manager of the Financial Creditor had signed the application as an authorized person, and a specific authorization letter was filed along with the application. Therefore, the objection regarding authorization was deemed incongruous and rejected.

2. Existence and default of financial debt:

The Financial Creditor provided evidence of a financial debt amounting to Rs. 14,24,90,488/- as of 30-11-2019, with the default occurring on 30-06-2019. The Corporate Debtor admitted the liability and sought a One Time Settlement (OTS) on 11-01-2019, which was approved but not adhered to. The Tribunal found that the existence of debt and default was reasonably established by the Financial Creditor, fulfilling the requirements for admission under Section 7(4) of the Insolvency and Bankruptcy Code.

3. Jurisdiction of the Tribunal:

The Corporate Debtor contended that the Tribunal lacked jurisdiction as one of the properties involved was a trust property. The Tribunal clarified that the application was filed against the Corporate Debtor, a company incorporated under the Companies Act, and thus within its jurisdiction. The Tribunal also noted that the registered office of the Corporate Debtor is located in Thiruvananthapuram, within the territorial jurisdiction of the NCLT Kochi Bench.

4. Validity of Master Credit Agreement:

The Corporate Debtor argued that the Master Credit Agreement was a unilateral agreement and not a contract. The Tribunal dismissed this argument, stating that the agreement and related documents were executed by the Corporate Debtor, and the objections raised were merely excuses to delay the Corporate Insolvency Resolution Process (CIRP).

5. Applicability of Insolvency and Bankruptcy Code to pending loans and trust properties:

The Corporate Debtor claimed that the Insolvency and Bankruptcy Code and NCLT Rules do not have retrospective effect on pending loans and cannot be applied to trust properties. The Tribunal rejected this argument, emphasizing that the Code applies to companies incorporated under the Companies Act, and the Supreme Court has upheld its constitutional validity.

6. Capitalization of penal interest:

The Corporate Debtor alleged that the Financial Creditor engaged in the unconscionable practice of capitalizing penal interest, contrary to a Supreme Court decision. The Tribunal found this argument irrelevant to the admission of the application, as the primary concern was the existence of debt and default.

Conclusion:

The Tribunal concluded that the application filed by the Financial Creditor met all the criteria under the Insolvency and Bankruptcy Code. The Corporate Debtor's objections were found to be without merit. Consequently, the Tribunal admitted the application for initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor, imposed a moratorium under Section 14 of the Code, and appointed an Interim Resolution Professional to conduct the process.

Order:

The application IBA/51/KOB/2019 was admitted, and the Corporate Insolvency Resolution Process commenced from the date of the order, 7th February 2020.

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