Tribunal orders CIRP against Corporate Debtor for loan defaults

The tribunal admitted the petition and ordered the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to persistent defaults in loan repayments. The tribunal appointed an Interim Resolution Professional (IRP) and implemented a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. The management of the Corporate Debtor will be under the IRP, and essential services must continue during the moratorium. The tribunal excluded the sale proceeds of a vessel from the CIRP process.

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Issues Involved:
1. Default in repayment of loan facilities by the Corporate Debtor.
2. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.
3. Allegations of malafide intention and mismanagement by the Financial Creditor.
4. Non-disclosure of the capsizing of a vessel by the Financial Creditor.
5. Appointment of an Interim Resolution Professional (IRP).
6. Implementation of a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Default in Repayment of Loan Facilities by the Corporate Debtor:
The Financial Creditor (ICICI Bank) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor (Mercator Ltd.) for defaulting on loan repayments. The Corporate Debtor defaulted on four facilities sanctioned between 2014 and 2016, aggregating to USD 47 million. The insolvency application was based on defaults under two facilities extended in December 2016, totaling USD 12 million. The Corporate Debtor was irregular in servicing its debt obligations from February 28, 2019, and the account was classified as a Non-Performing Asset on May 21, 2019. Despite notices of recall issued by the Financial Creditor, the Corporate Debtor continued to default, leading to the initiation of CIRP.

2. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Financial Creditor sought to initiate CIRP against the Corporate Debtor due to persistent defaults in repayment. The tribunal emphasized that the existence of debt and default are the primary factors to consider for admitting a petition under Section 7. The tribunal found that the Financial Creditor successfully demonstrated the existence of debt and default, fulfilling the requirements for initiating CIRP.

3. Allegations of Malafide Intention and Mismanagement by the Financial Creditor:
The Corporate Debtor alleged that the petition was filed with malafide intentions to hinder and wrongfully avail the assets of other secured creditors. It contended that the Financial Creditor failed to take timely steps to protect and realize the value of the mortgaged vessels, leading to their depreciation. The tribunal found no merit in these contentions, noting that the Financial Creditor had taken steps to sell the dredgers and that the delays were due to non-cooperation by the Corporate Debtor.

4. Non-disclosure of the Capsizing of a Vessel by the Financial Creditor:
The Corporate Debtor argued that the Financial Creditor did not disclose the capsizing of the vessel Tridevi Prem, which should lead to dismissal under Section 75 of IBC. The tribunal dismissed this contention, stating that a Section 7 application requires only the submission of an application in the prescribed format, not a detailed plaint.

5. Appointment of an Interim Resolution Professional (IRP):
The tribunal appointed Mr. Girish Siriram Juneja as the Interim Resolution Professional (IRP) to carry out the functions as mentioned under the Insolvency & Bankruptcy Code. The Financial Creditor was directed to deposit INR 5 lakh towards the initial CIRP cost.

6. Implementation of a Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016:
The tribunal ordered a moratorium prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of assets, and other actions to recover or enforce security interests. The moratorium will be effective until the completion of the CIRP or until a resolution plan is approved or liquidation is ordered. The tribunal also excluded the sale proceeds of the vessel 'MT' Premmala from the CIRP process and mandated the continuation of essential goods or services to the Corporate Debtor during the moratorium period.

Conclusion:
The tribunal admitted the petition and ordered the initiation of CIRP against the Corporate Debtor. The management of the Corporate Debtor will vest in the IRP, and the suspended directors and employees must cooperate with the IRP. The tribunal directed the Registrar of Companies, Mumbai, to update the master data of the Corporate Debtor and communicated the order to both parties and the IRP. The interlocutory application was disposed of in light of the final order.

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