Corporate Insolvency Resolution Process initiated under Section 7 IBC after Financial Creditor proves debt default through Debenture Trust Agreement

The NCLT Chennai admitted an application under Section 7 of the IBC for initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. The Tribunal found that the Financial Creditor had proved the existence of financial debt through a Debenture Trust Agreement and established default by the Corporate Debtor in repayment. Consequently, the CIRP was initiated and moratorium under Section 14(1) was declared, with the application being allowed.

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Issues Involved:
1. Admissibility of the application u/s 7 of the Insolvency and Bankruptcy Code, 2016.
2. Existence of financial debt and default.
3. Appointment of Interim Resolution Professional (IRP).
4. Declaration of moratorium.

Summary:

1. Admissibility of the application u/s 7 of the Insolvency and Bankruptcy Code, 2016:

This Application was filed by Beacon Trusteeship Limited (Financial Creditor) on 14.12.2022 u/s 7 of the Insolvency and Bankruptcy Code, 2016, r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, against Imperial Consultants and Securities Limited (Corporate Debtor). The prayer was to admit the Application, initiate the Corporate Insolvency Resolution Process (CIRP), declare moratorium, and appoint Interim Resolution Professional (IRP).

2. Existence of financial debt and default:

The Financial Creditor claimed a sum of Rs. 246,88,00,000/- as total Financial Debt due and payable by the Corporate Debtor as on 13.12.2022, with the date of default being 31.12.2021. The Corporate Debtor admitted the loan/issue of debentures and default due to financial crisis. The Tribunal found that the existence of 'debt' and 'default' was proven beyond reasonable doubt by the Financial Creditor based on the documents presented.

3. Appointment of Interim Resolution Professional (IRP):

The Financial Creditor proposed Mr. Vishal Ghisulal Jain as the IRP, who filed his consent in Form-2. The Tribunal directed the IRP to take charge of the Corporate Debtor's management immediately, cause public announcement as prescribed u/s 15 of the IBC, 2016 within three days, and call for submissions of claim by the creditors. The IRP was also directed to comply with the provisions of Sections 13(2), 15, 17, & 18 of the Code and file his report within 30 days.

4. Declaration of moratorium:

As a consequence of admitting the application u/s 7 of the Code, a moratorium u/s 14(1) was declared, prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of assets, and actions to foreclose or recover any security interest. The moratorium period shall last until the completion of the CIRP or an order for liquidation is passed. The IRP was directed to conduct the CIRP as stipulated under Chapter VIII of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Conclusion:

The Tribunal admitted the application, initiated CIRP, declared moratorium, and appointed Mr. Vishal Ghisulal Jain as the IRP. The order was communicated to the Financial Creditor, Corporate Debtor, IBBI, and the Registrar of Companies.

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