2019 (2) TMI 1989 - Tri - Insolvency and Bankruptcy

Court upholds Petitioner's claim for Corporate Insolvency Resolution Process due to loan default

The court upheld the Petitioner's claim to initiate Corporate Insolvency Resolution Process against the Corporate Debtor due to default in loan repayment. ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- This Adjudicating Authority, on perusal of the documents filed by the Creditor, is of the view that the Corporate Debtor defaulted in repaying the loans availed and also placed the name of the Insolvency Resolution Professional to act as Interim Resolution Professional and there being no disciplinary proceedings pending against the proposed resolution professional, therefore the Application under sub-section (2) of Section 7 is taken as complete, accordingly this Bench hereby admits this Petition. Petition admitted - moratorium declared. Issues involved:Corporate Insolvency Resolution Process (CIRP) initiation based on default in repayment of facilities granted under the Insolvency and Bankruptcy Code, 2016.Detailed Analysis:Issue 1: Default in RepaymentThe Petitioner, a bank, sought the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for defaulting on repayment of facilities granted. The default occurred on 30.06.2017, totaling Rs. 1255.17 Lacs. The Petitioner provided details of the facilities granted, including Term Loans amounting to Rs. 1900.00 Lacs. The Petition was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, supported by relevant loan and security documents.Issue 2: Supporting DocumentsThe Petitioner submitted various loan and security documents related to the sanction of the loan, such as Loan Agreement, Deed of Hypothecation, Letter of Continuing Security, Promissory Note, and Deed of Guarantee. Additionally, a Certificate of Registration of Mortgage was provided. The Statement of Account for the Term Loans reflected the claimed amount, consistent with the Petition's contentions.Issue 3: Default ConfirmationThe Petitioner enclosed a notice under Section 13(2) of SARFAESI Act, 2002, demanding repayment from the Corporate Debtor. Furthermore, an order for attachment of the Corporate Debtor's properties was issued by the Dy. Commissioner of Sales Tax, indicating additional outstanding dues. These actions confirmed the default by the Corporate Debtor.Issue 4: Corporate Debtor's ResponseIn response, the Corporate Debtor cited financial crisis, historical operations, pending applications before DRT, and disputed interest charges. However, the Adjudicating Authority disregarded these contentions, citing the Supreme Court's decision emphasizing the establishment of debt and default as key factors for admission under Section 7 of the Code.Issue 5: Adjudication and OrdersUpon reviewing the documents, the Adjudicating Authority found sufficient evidence of default by the Corporate Debtor. Consequently, the Insolvency Resolution Professional was appointed, and the Petition was admitted. Moratorium orders were issued, restricting various actions against the Corporate Debtor, and essential services supply was mandated to continue during the moratorium period.ConclusionThe judgment upheld the Petitioner's claim for initiating the Corporate Insolvency Resolution Process against the Corporate Debtor based on the established default in loan repayment, supported by relevant documents and legal provisions. The Adjudicating Authority's decision to admit the Petition and appoint an Interim Resolution Professional was in line with the requirements of the Insolvency and Bankruptcy Code, 2016.