2020 (2) TMI 1129 - Tri - Insolvency and Bankruptcy

Tribunal Upheld Petition under IBC Section 7

The Tribunal found the petition under Section 7 of the Insolvency and Bankruptcy Code maintainable as the Financial Creditor proved the existence of a ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of dues - existence of debt and default or not - HELD THAT:- The Corporate Debtor's foremost contention, that the debt is not Financial Debt as per section 5(8), as per section 5(8)(a) 'money borrowed against the payment of interest'. However, from the Loan acceptance letter itself is evident that the money has been borrowed with an interest of 18% per annum by the Corporate Debtor. Also Bank statements placed on record shows that money was transferred form Bank account of Financial Creditor. Same has also been Certified by the Bank of Financial Creditor. Hence, no further proof is required in this regard. Also, as per section 5(7) of IBC, Financial Creditor means any person to whom a financial debt is owed and includes a person to whom such a debt is legally assigned or transferred. Hence this contention of the Corporate Debtor is unsustainable. e Financial Creditor has established beyond doubt that the loan was duly accepted and duly received by the Corporate Debtor and that there has been default in payment of the Debt by the Corporate Debtor. The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor. Petition admitted - moratorium declared. Issues Involved:1. Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC).2. Determination of the existence of a financial debt and default.3. Appointment of an Interim Resolution Professional (IRP).4. Declaration of moratorium.Issue-wise Detailed Analysis:1. Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC):The Corporate Debtor challenged the maintainability of the petition on the grounds that the alleged debt does not qualify as a 'financial debt' under Section 5(8) of the IBC and that there is no default as defined in Section 3(12) of the IBC. However, the Financial Creditor contended that the loan amount, bearing interest at the agreed rate of 18% per annum, qualifies as a financial debt. The Tribunal found that the Financial Creditor had provided sufficient evidence, including loan acceptance letters, bank statements, and statements of account, to establish the existence of a financial debt and default, thus making the petition maintainable.2. Determination of the existence of a financial debt and default:The Financial Creditor provided evidence of loans extended to the Corporate Debtor in tranches totaling Rs. 45,00,000, with an agreed interest rate of 18% per annum. The Corporate Debtor had accepted these loans and made partial interest payments until May 2016. The Financial Creditor also provided recall notices and statements of account confirming the outstanding debt. The Tribunal found that the Financial Creditor had established beyond doubt the existence of a financial debt and default by the Corporate Debtor, as defined under Sections 3(11) and 5(8) of the IBC.3. Appointment of an Interim Resolution Professional (IRP):The Financial Creditor proposed the name of Mr. Vinod Tarachand Agrawal as the IRP. He filed his written communication in Form 2 along with a copy of his Certificate of Registration. The Tribunal appointed Mr. Agrawal as the IRP to carry out the functions as per the IBC, including managing the Corporate Debtor's affairs during the Corporate Insolvency Resolution Process (CIRP).4. Declaration of moratorium:The Tribunal declared a moratorium under Section 14 of the IBC, which includes:- The institution or continuation of suits or proceedings against the Corporate Debtor.- Transferring, encumbering, or disposing of any assets of the Corporate Debtor.- Any action to foreclose, recover, or enforce any security interest created by the Corporate Debtor.- Recovery of any property by an owner or lessor occupied by the Corporate Debtor.The moratorium shall remain in effect until the completion of the CIRP or until the Tribunal approves the resolution plan or passes an order for liquidation.Conclusion:The Tribunal admitted the petition filed by the Financial Creditor under Section 7 of the IBC, initiating the CIRP against the Corporate Debtor. The Tribunal found that the Financial Creditor had successfully established the existence of a financial debt and default. Consequently, the Tribunal appointed Mr. Vinod Tarachand Agrawal as the IRP and declared a moratorium to facilitate the CIRP. The Financial Creditor was directed to deposit Rs. 1,00,000 with the IRP to cover the expenses of issuing public notice and inviting claims. The Registry was instructed to communicate the order to the relevant parties and update the Master Data of the Corporate Debtor.