Tribunal Appoints Interim Resolution Professional, Declares Moratorium, Upholds Creditor's Claim

The Tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, appointed Mr. Arunava Sikdar as the Interim Resolution Professional, declared a moratorium under Section 14 of the Code, and directed compliance from involved parties. The objections raised by the Corporate Debtor were dismissed, affirming the applicant's status as a financial creditor with a legitimate claim for the outstanding debt.

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Issues Involved:

1. Jurisdiction of the Tribunal.
2. Financial Creditor's claim and the background of the debt.
3. Execution and validity of the Loan Agreement.
4. Default in repayment by the Corporate Debtor.
5. Status of the applicant as a Financial Creditor.
6. Appointment of Interim Resolution Professional (IRP).
7. Objections raised by the Corporate Debtor.
8. Intervention by other financial creditors.
9. Admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
10. Declaration of moratorium.

Detailed Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal has territorial jurisdiction over the National Capital Territory (NCT) of Delhi, as the registered office of the respondent corporate debtor, M/s Affinity Beauty Salon Private Limited, is located in New Delhi. This is in accordance with sub-section (1) of Section 60 of the Insolvency and Bankruptcy Code, 2016 (the Code).

2. Financial Creditor's Claim and Background of the Debt:
The applicant, claiming to be a financial creditor, filed an application under Section 7 of the Code. The applicant had advanced amounts of Rs. 2.5 crores and Rs. 5 crores to the Corporate Debtor towards the issuance of cumulative convertible redeemable preference shares. However, these shares were not registered, leading the applicant to demand a refund, which was not honored by the Corporate Debtor.

3. Execution and Validity of the Loan Agreement:
During the pendency of an appeal, the Corporate Debtor and the applicant entered into a Loan Agreement dated 30.03.2018, converting the outstanding amount into a loan to be repaid over four years with monthly payments. The Loan Agreement was accepted by the Hon'ble National Company Law Appellate Tribunal (NCLAT).

4. Default in Repayment by the Corporate Debtor:
The Corporate Debtor defaulted on the monthly loan payments as stipulated in the Loan Agreement, making only a partial payment of Rs. 5 lakhs. The applicant served a demand notice, but no further payments were made.

5. Status of the Applicant as a Financial Creditor:
The Tribunal recognized the applicant as a financial creditor based on the Loan Agreement, which converted the share subscription money into a loan. This agreement was acknowledged by the NCLAT, binding the Corporate Debtor to its terms.

6. Appointment of Interim Resolution Professional (IRP):
The applicant proposed Mr. Arunava Sikdar as the IRP, who met the requirements under Section 7(3)(b) of the Code and had no disciplinary proceedings pending against him.

7. Objections Raised by the Corporate Debtor:
The Corporate Debtor contended that the Loan Agreement was executed under undue influence and was biased. However, this objection was dismissed as the agreement was acknowledged by the NCLAT, and the Corporate Debtor had confirmed the settlement before the appellate tribunal.

8. Intervention by Other Financial Creditors:
An application by other financial creditors questioned the conversion of share subscription money into a financial debt. The Tribunal reiterated that the Loan Agreement was valid and binding, as acknowledged by the NCLAT.

9. Admission of the Application Under Section 7 of the Code:
The Tribunal admitted the application under Section 7 of the Code, satisfied that:
- Default had occurred.
- The application was complete.
- No disciplinary proceedings were pending against the proposed IRP.

10. Declaration of Moratorium:
The Tribunal declared a moratorium under Section 14 of the Code, imposing prohibitions on:
- Institution or continuation of suits or proceedings against the Corporate Debtor.
- Transferring or disposing of the Corporate Debtor's assets.
- Foreclosure or enforcement of security interests.
- Recovery of property by owners or lessors.

The IRP was directed to make a public announcement and perform functions as per the Code, with all personnel connected to the Corporate Debtor required to cooperate.

Conclusion:
The Tribunal admitted the application, appointed Mr. Arunava Sikdar as the IRP, declared a moratorium, and directed necessary communications to relevant parties. The Corporate Debtor's objections were dismissed, and the applicant was recognized as a financial creditor entitled to claim the outstanding debt.

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