2019 (12) TMI 285 - AT - Insolvency and Bankruptcy

Appeal allowed, invalidating Adjudicating Authority's orders. Corporate Debtor released, management handed over, fee fixed.

Rajeev Anand Versus Srei Equipment Finance Limited & Anr.

The appeal was allowed, declaring all orders and actions by the Adjudicating Authority as illegal and setting them aside. The Corporate Debtor was ... Appeal against the initiation of CIRP - default committed by the ‘Corporate Debtor’ in repayment of its dues under the loan Agreement - The ‘Corporate Debtor’ contends that on the date of filing of the petition, there was no default as contemplated in Section 7 HELD THAT:- It is pertinent to mention that the ‘Corporate Debtor’ / Applicant has filed an Affidavit dated 28th March 2019 along with letter issued by YES Bank, dated 10th August 2018, to substantiate that the amount of ₹ 18.86 crores under the loan agreement dated 1st April, 2016 was credited in its account, and it immediately paid back the entire amount to the Applicant /Respondent in two tranches, firstly on 13th April, 2016 a sum of ₹ 17 Crores and secondly on 16th April, 2016 a sum of ₹ 1.86 crores. It is also asserted that the said amount has not been paid towards any previous outstanding. It appears that the ‘Corporate Debtor’ pleaded before the Adjudicating Authority that amount disbursed under the Loan Agreement dated 1st April, 2016, ₹ 18,86,00,000/- has been paid back on 13th April 2016 and 16th April 2016 itself, and as on date, no payment is due to the ‘Financial Creditor’ under the said Agreement - It appears that in compliance with the order of the Adjudicating Authority dated 29th November 2018 the ‘Corporate Debtor’ filed an Affidavit along with Bank certificate. But in reply no evidence was submitted to prove that the outstanding amount is due and payable. It is clear that document which was already rejected by the Adjudicating Authority, has been made the basis for passing the Order of Admission, which is not permissible under law - it is clear that finding of the Adjudicating Authority that a sum of ₹ 18,86,00,000/- was again disbursed to the ‘Corporate Debtor’ by the ‘Financial Creditor’ which is still due and payable is erroneous, without any basis and un-sustainable. In effect, order (s) passed by Ld. Adjudicating Authority appointing ‘Interim Resolution Professional’, declaring moratorium, freezing of account and all other order (s) passed by Adjudicating Authority pursuant to impugned order and action taken by the ‘resolution Professional’, including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by the 1st Respondent under Section 7 of the I&B Code is dismissed. The Adjudicating Authority will now close the proceeding. Issues:1. Appeal against order of Admission under Section 7 of the Insolvency and Bankruptcy Code 2016.2. Default in repayment of dues under loan Agreement dated 1st April 2016.3. Discrepancies in amount claimed to be in default and details of default.4. Allegations of suppression of facts and pre-mature petition filing.5. Disbursement and rescheduling of loan amounts by the Appellant.6. Lack of evidence of financial debt and disbursement on 1st April 2016.7. Allegations of presumed debt and errors in the impugned order.8. Reliance on Supplementary Affidavit and rejection by Adjudicating Authority.9. Violation of natural justice principles in passing the impugned order.10. Lack of document submission to prove outstanding amount due and payable.Analysis:1. The appeal was filed against the order of Admission under Section 7 of the Insolvency and Bankruptcy Code 2016 due to default in repayment of dues under a loan Agreement dated 1st April 2016. The Appellant claimed that certain instalments were not paid by the Respondent, leading to the initiation of insolvency proceedings.2. Discrepancies arose regarding the total amount claimed to be in default and the details of default provided by the Petitioner. The Respondent contended that the alleged default did not exist at the time of petition filing, citing rescheduling of loan amounts and moratorium agreements between the parties.3. The Adjudicating Authority admitted the petition based on the previous admission by the Corporate Debtor regarding restructuring of loan amounts. However, the Appellant challenged the admission, citing lack of evidence of disbursement on 1st April 2016 and errors in the order based on presumed debt.4. The Appellant further argued that the impugned order was passed without providing an opportunity to the Corporate Debtor to file objections, violating principles of natural justice. The Respondent failed to establish the existence of the financial debt with proper documentation.5. Despite the submission of a Supplementary Affidavit by the Respondent, the Adjudicating Authority's reliance on it was contested by the Appellant, highlighting contradictions and lack of supporting evidence. The appeal also pointed out the rejection of the Supplementary Affidavit by the Authority.6. The Corporate Debtor presented evidence, including bank certificates and affidavits, to prove repayment of the disbursed amount under the loan Agreement dated 1st April 2016. The Adjudicating Authority's findings of outstanding amounts were deemed erroneous and unsustainable.7. Ultimately, the appeal was allowed, declaring all orders and actions taken by the Adjudicating Authority as illegal and setting them aside. The Corporate Debtor was released from proceedings, and the Interim Resolution Professional was directed to hand over management and records. The Authority was tasked with fixing the fee of the Interim Resolution Professional to be paid by the Financial Creditor.