Tribunal Admits Company Petition for Insolvency under Section 7

The Tribunal admitted the Company Petition under section 7 of the Insolvency and Bankruptcy Code, appointing an Interim Resolution Professional to manage the Corporate Insolvency and Resolution Process due to the Corporate Debtor's default in repaying an outstanding amount. A moratorium was imposed to protect the Corporate Debtor from certain actions, ensuring uninterrupted essential supplies. The Financial Creditor's evidence of debt and default, supported by documents and a Debt Recovery Certificate, led to the admission of the petition as the Corporate Debtor did not contest the allegations. The resolution process was set to proceed under the supervision of the appointed professional.

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Issues:
Company petition under section 7 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency and Resolution Process due to default in repayment by Corporate Debtor.

Analysis:
The Financial Creditor filed a Company Petition under section 7 of the Insolvency and Bankruptcy Code against the Corporate Debtor, citing default in repaying an outstanding amount of Rs. 71,69,27,203.48 as of 24.04.2018. The Financial Creditor had initially sanctioned a Rupee Term Loan Facility of Rs. 165 Crores to the Corporate Debtor for business purposes related to establishing Karaikal Port Private Limited (KPPL) by equity participation and Capital expenditure. The terms of the loan were later modified through Credit Arrangement Letters to include financing for other projects as well. A term loan was disbursed and utilized by the Corporate Debtor, with repayment scheduled in 21 equated quarterly installments starting from 02.07.2011. Despite certain security releases upon partial repayments, the Corporate Debtor failed to meet its repayment obligations, leading to the initiation of Debt Recovery Tribunal (DRT) proceedings. Subsequently, DRT-II issued a Debt Recovery Certificate in favor of the Financial Creditor for the outstanding amount, which formed the basis of the Company Petition.

The Financial Creditor presented various documents, including Credit Arrangement Letters, Guarantee Deeds, Mortgage Deeds, and Pledge Forms, to support the existence of debt and default by the Corporate Debtor. Additionally, the Debt Recovery Certificate issued by DRT-II confirmed the amount due and payable by the Corporate Debtor. The Tribunal found that the Financial Creditor had sufficiently proven the debt and default, as the Corporate Debtor had failed to repay the certified amount despite multiple opportunities for settlement. The Corporate Debtor did not contest the existence of the debt or default, leading the Bench to admit the Company Petition for further proceedings.

Consequently, the Tribunal admitted the Company Petition and appointed an Interim Resolution Professional to oversee the Corporate Insolvency and Resolution Process. A moratorium was declared to prohibit certain actions against the Corporate Debtor, essential supplies were to continue uninterrupted, and specific transactions were exempted from the moratorium. The moratorium was set to be in effect until the completion of the insolvency resolution process or liquidation, with public announcement requirements and fee regulations for the Interim Resolution Professional outlined. The Registry was directed to communicate the order to all relevant parties promptly.

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