Tribunal Admits Petition for Corporate Insolvency Resolution Process

The Tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, finding overwhelming evidence that the loan amount was disbursed to the corporate debtor, leading to a default in repayment. The Tribunal approved the appointment of an Interim Resolution Professional and directed the initiation of the Corporate Insolvency Resolution Process. The financial creditor was required to deposit funds for expenses, and the ex-management was instructed to cooperate with the IRP. The Tribunal emphasized the importance of Resolution Professionals in addressing inflated claims by financial entities to ensure fairness in the insolvency process.

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Issues:
Claim under Section 7 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process.

Analysis:
The Petitioner, a financial creditor, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process against the respondent, a corporate debtor. The financial creditor, a Non-Banking Financial Company, claimed that the corporate debtor had availed a loan facility of Rs. 67,00,000, secured by a machine hypothecated to the petitioner. Despite various notices and a settlement deed, the corporate debtor defaulted on payments, leading to a total default amount of Rs. 33,98,296. The financial creditor provided detailed documentation to substantiate the loan and default amount, including a statement of account, settlement deed, and credit agency report.

In response, the corporate debtor denied receiving the disbursed loan amount, which was contradicted by evidence showing the admission of liability in a previous petition and subsequent default on settlement payments. The Tribunal found overwhelming evidence that the loan amount was disbursed to the corporate debtor, establishing default in repayment exceeding the statutory limit. Consequently, the petition was admitted as complete, meeting all requirements of Section 7 of the Code for initiating the Corporate Insolvency Resolution Process.

The Tribunal further examined compliance with Section 7(2) and Section 7(5) of the IBC, along with Rule 4(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Finding a default had occurred, the Tribunal approved the appointment of an Interim Resolution Professional proposed by the financial creditor. The Interim Resolution Professional was directed to make a public announcement of the application's admission and declare a moratorium under Section 14 of the Code, with exceptions for specified transactions and essential supplies to the corporate debtor.

Additionally, the financial creditor was instructed to deposit Rs. 2 Lakhs with the Interim Resolution Professional to cover expenses, subject to adjustment by the Committee of Creditors. Directions were issued for the ex-management to provide all relevant documents and information to the IRP promptly. The Tribunal addressed concerns regarding inflated claims by financial entities, emphasizing the role of Resolution Professionals in rectifying such issues to prevent injustice to corporate debtors. Communication of the order and compliance reporting were also mandated to relevant parties for procedural updates.

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