Corporate Debtor's Default Triggers Insolvency Process, Petitioner's Creditor Status Upheld

The Tribunal found that the Corporate Debtor defaulted on a financial debt, leading to its admission into Corporate Insolvency Resolution Process (CIRP). The dispute over the petitioner's status as a Financial Creditor was dismissed, affirming his eligibility. An Interim Resolution Professional was appointed to manage the CIRP, with a moratorium declared to protect the Corporate Debtor. The judgment underscores the Tribunal's thorough assessment of the default, rejection of the dispute defense, and the initiation of CIRP with the appointment of an Interim Resolution Professional.

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Issues:
1. Default in payment of financial debt by the Corporate Debtor.
2. Dispute regarding the petitioner's status as a Financial Creditor.
3. Appointment of an Interim Resolution Professional.

Issue 1: Default in payment of financial debt by the Corporate Debtor

The petitioner, a financial creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor, alleging default in paying a financial debt of Rs. 5,09,33,204. The petitioner was appointed as a director of the Corporate Debtor and had infused funds as an unsecured loan. The Corporate Debtor admitted receiving the loan but later stopped paying the petitioner his remuneration and interest on the loan since May 2017. The Tribunal held that the Corporate Debtor had indeed committed a default in paying the debt, which exceeded the threshold limit required to initiate Corporate Insolvency Resolution Process (CIRP).

Issue 2: Dispute regarding the petitioner's status as a Financial Creditor

The Corporate Debtor contended that a commercial dispute between the petitioner and another individual was ongoing and that the petitioner could not be considered a Financial Creditor due to this dispute. However, the Tribunal dismissed this defense, stating that the dispute between the petitioner and the other individual was irrelevant to the proceedings. The Tribunal emphasized that the petitioner had procured shares of the Corporate Debtor and had infused the required loan amount, establishing his status as a Financial Creditor. The defense raised by the Corporate Debtor was rejected in its entirety.

Issue 3: Appointment of an Interim Resolution Professional

The Tribunal, after finding the application defect-free, admitted the Corporate Debtor into the CIRP. A moratorium was declared under Section 14 of the Insolvency and Bankruptcy Code, 2016, prohibiting various actions against the Corporate Debtor. Mr. Sunil Kumar Agarwal was appointed as the Interim Resolution Professional to conduct the CIRP. The IRP was directed to perform various functions as per the Code and ensure the smooth conduct of the resolution process. The Financial Creditor was instructed to provide an advance amount to the IRP for the process. The Registry was directed to communicate the order to all relevant parties and upload it on the website promptly.

This judgment highlights the Tribunal's meticulous analysis of the default in payment by the Corporate Debtor, the rejection of the dispute-related defense raised by the Corporate Debtor, and the subsequent admission of the Corporate Debtor into the CIRP with the appointment of an Interim Resolution Professional to oversee the resolution process.

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