2019 (1) TMI 453 - Tri - Insolvency and Bankruptcy

Tribunal Admits Company Petition under Insolvency Code Section 7, Moratorium Declared

The Tribunal admitted the Company Petition under Section 7 of the Insolvency & Bankruptcy Code, finding the debt, default, and completeness of the ... Maintainability of petition - Failure to make payment on the part of Corporate Debtor - Held that:- As per the Section 7 of IBC provides, a petition has to be admitted if a default has occurred, no dispute has been raised with regard to the debt due, application filed is complete and no disciplinary proceedings are pending against the proposed resolution professional - This Petition clearly reveals that there is a debt as defined in Section 3(11) of IBC, also there is default in this case within the meaning of Section 3(12) of IBC and no evidence of dispute with regard to the claim amount has been raised by the Corporate Debtor. The application of the Financial Creditor is complete and there are no disciplinary proceedings pending against the proposed resolution professional. Therefore, this petition is to be admitted. This Bench hereby admits this petition filed under Section 7 of IBC, 2016, declaring moratorium with consequential directions. Issues:Company petition under Section 7 of Insolvency & Bankruptcy Code, 2016 by Financial Creditor against Corporate Debtor for non-payment. Discrepancies in claimed amount, limitation period, acknowledgment of debt, settlement proposal, reliance on 'Without Prejudice' letter, and appointment of Interim Resolution Professional.Analysis:The Company Petition was filed by the Financial Creditor under Section 7 of the Insolvency & Bankruptcy Code, 2016, against the Corporate Debtor for defaulting on a payment of a substantial amount. The Petitioner, as the Assignee of the dues from Axis Bank, provided details of the financial facilities granted to the Corporate Debtor, emphasizing the default date and the liability admitted by the Corporate Debtor in its financial statements. The Financial Creditor presented evidence such as a Letter of Acknowledgment of Debt and a settlement proposal made by the Corporate Debtor. Additionally, a certificate under the Bankers Book Evidence Act, 1891 was annexed to support the claim.The Corporate Debtor, in response, raised several arguments challenging the claimed amount, the limitation period, and the validity of the acknowledgment of debt. The Corporate Debtor contended that discrepancies existed in the amount claimed and the bank statements provided, questioning the timeliness of the petition due to the limitation period. The Corporate Debtor argued that the acknowledgment of debt, made after the limitation period, did not reset the limitation period as it lacked a promise to pay as required by the Indian Contract Act, 1872. Furthermore, the Corporate Debtor disputed the reliance on the 'Without Prejudice' letter, claiming it was not filed by the Financial Creditor.The Financial Creditor relied on legal precedents to counter the Corporate Debtor's arguments. Citing judgments, the Financial Creditor highlighted that discrepancies in the claimed amount did not invalidate the insolvency process and that the exact quantum of the default amount would be determined during the resolution process. The Financial Creditor also emphasized the Corporate Debtor's conduct in delaying settlement discussions despite previous attempts.Ultimately, the Tribunal found that the petition met the requirements under Section 7 of the IBC, with a debt, default, completeness of the application, and absence of dispute regarding the claim amount. Consequently, the petition was admitted, and a moratorium was declared, prohibiting certain actions against the Corporate Debtor. The Tribunal appointed an Interim Resolution Professional to oversee the corporate insolvency resolution process, with the order of moratorium effective until the completion of the resolution process or liquidation approval. The decision was promptly communicated to the relevant parties.