2019 (6) TMI 131 - Tri - Insolvency and Bankruptcy

Edelweiss vs. Sejal Glass: IBC Petition Admitted, Moratorium Declared

Edelweiss Asset Reconstruction Co. Ltd. Versus Sejal Glass Ltd.

The petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, by Edelweiss Asset Reconstruction Co. Limited against Sejal Glass Ltd. was ... Initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - default in repayment of the debt amount i.e. ₹40, 49, 72, 485/- - section 7 of Insolvency & Bankruptcy Code, 2016 - HELD THAT:- The respondent’s contentions raised in the Affidavit in reply are unsustainable. The existence of debt is clear from the Letter of the Corporate Debtor, its affidavit in reply filed in Hon’ble Bombay High Court, loan agreements, various documents relating mortgage deed, hypothecation deed, certificate of creation of charge and personal guarantee agreements - The Petitioner has proved the existence of debt as well as the default. The Application under sub-section (2) of Section 7 of IBC, 2016is complete. The existing debt of more than oneRs lac against the corporate debtor and its default is also proved - the petition filed U/S 7 of the Insolvency and Bankruptcy Code for initiation of corporate insolvency process against the corporate debtor deserves to be admitted. Petition admitted - Moratorium declared. Issues Involved:1. Default in repayment of debt by the Corporate Debtor.2. Validity of the assignment agreement and loan documents.3. Objections raised by the Corporate Debtor regarding incomplete application and insufficiently stamped documents.4. Admission of the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016.5. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium.Detailed Analysis:1. Default in Repayment of Debt by the Corporate Debtor:The petitioner, Edelweiss Asset Reconstruction Co. Limited, filed a petition under Section 7 of the Insolvency & Bankruptcy Code, 2016, against the Corporate Debtor, Sejal Glass Ltd., for initiating Corporate Insolvency Resolution Process (CIRP). The petitioner claimed that the Corporate Debtor defaulted in repaying a debt amounting to Rs. 40,49,72,485/-, with the default date stated as 13.10.2016. The debt was initially assigned to the petitioner by the State Bank of Patiala through an assignment agreement dated 26.06.2014.2. Validity of the Assignment Agreement and Loan Documents:The loan facilities provided by the State Bank of Patiala included Term Loan-1, Cash Credit, Letter of Credit, and Bank Guarantee, which were later converted to Term Loan-2. These facilities were secured by a mortgage, hypothecation, and personal guarantees. The petitioner provided various documents, including Memorandum of Entry, Agreement of Hypothecation, Deeds of Guarantee, and Sanction Letters, to establish the existence of debt. The restructuring of the debt was agreed upon by the Corporate Debtor, but the restructuring was revoked due to default in repayment.3. Objections Raised by the Corporate Debtor:The Corporate Debtor raised two main objections:- The application under Section 7 of IBC was incomplete.- The three agreements relied upon by the petitioner were insufficiently stamped and thus inadmissible in evidence.The Corporate Debtor contended that the petitioner had wrongfully submitted copies of Certificate of Registration of Charge for unrelated loans already repaid. Additionally, the Corporate Debtor argued that the agreements were liable to be impounded under the Maharashtra Stamp Act, 1958, and referenced judgments from the Hon'ble Supreme Court and Bombay High Court to support their claims.4. Admission of the Petition under Section 7 of IBC:After hearing arguments from both sides, the Tribunal found that the petitioner had submitted sufficient evidence to prove the existence of debt and default. The objections raised by the Corporate Debtor were deemed unsustainable. The Tribunal noted that even if the agreements were not admissible as evidence, other documents, such as the Corporate Debtor's letter dated 14.05.2016 and their affidavit in reply dated 06.02.2018, clearly acknowledged the debt.5. Appointment of Interim Resolution Professional and Declaration of Moratorium:The Tribunal admitted the petition under Section 7 of IBC, 2016, and declared a moratorium under Section 14 of IBC. The moratorium prohibits:- Institution or continuation of suits or proceedings against the Corporate Debtor.- Transferring or disposing of any assets or legal rights of the Corporate Debtor.- Actions to foreclose or enforce any security interest created by the Corporate Debtor.- Recovery of any property occupied by the Corporate Debtor.The Tribunal appointed Shri Rajendra Kumar Girdhar as the Interim Resolution Professional (IRP) to carry out the functions under IBC. The order of moratorium will remain effective until the completion of the corporate insolvency resolution process or until the Tribunal approves a resolution plan or orders liquidation.Conclusion:The Tribunal concluded that the petition filed under Section 7 of IBC, 2016, was complete and the existence of debt and default by the Corporate Debtor was proven. The petition was admitted, and a moratorium was declared with the appointment of an IRP to oversee the insolvency resolution process.