2021 (6) TMI 190 - Tri - Insolvency and Bankruptcy

Tribunal admits application for Corporate Insolvency Resolution Process under IBC, 2016

The Tribunal admitted the application under Section 7 of the IBC, 2016, initiating the Corporate Insolvency Resolution Process (CIRP) against the ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - non-performing assets - existence of debt and dispute or not - HELD THAT:- The corporate debtor has committed default in repayment of its dues which it had availed of by the financial creditor by way of various credit facilities sanctioned and granted by it. The record from the information utility also posits the same fact as the same shows as 'deemed to be authenticated'. Further, it may be seen that the financial creditor has classified the accounts of the corporate debtor as NPA on March 31, 2018 and thus under the provisions of the IBC, taking into consideration the decision of the Supreme Court in GAURAV HARGOVINDBHAI DAVE VERSUS ASSET RECONSTRUCTION COMPANY (INDIA) LTD. AND ANR. [2019 (9) TMI 1019 - SUPREME COURT] and B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES [2018 (10) TMI 777 - SUPREME COURT], the right to sue accrues for the financial creditor to sue the corporate debtor on March 31, 2018 the date on which the account of the corporate debtor was declared as NPA and from the records it is evident that the financial creditor has filed the present petition on July 24, 2020 which is well within the 3 years period of limitation. Thus, there is a debt and default on the part of the corporate debtor and the corporate debtor is unable to repay its dues to the consortium of bankers and in the instant case to the financial creditor - Also the default arising in the present application is much prior to the advent of the Covid-19 pandemic and hence the corporate debtor cannot seek shelter also under section 10A of the IBC, 2016. The application as filed by the applicant-financial creditor is required to be admitted under section 7(5) of the I and B Code, 2016 - application admitted - moratorium declared. Issues Involved:1. Application for initiating Corporate Insolvency Resolution Process (CIRP).2. Financial debt and default by the corporate debtor.3. Classification of the account as Non-Performing Asset (NPA).4. Admissibility of the application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016.5. Appointment of Interim Resolution Professional (IRP).6. Declaration of moratorium.Detailed Analysis:1. Application for Initiating CIRP:The application I.B.A. No. 483 of 2020 was filed by the financial creditor, State Bank of India, under Section 7 of the IBC, 2016, against the corporate debtor, M/s. Consolidated Construction Consortium Ltd. The application sought the initiation of the CIRP, declaration of moratorium, and appointment of an IRP.2. Financial Debt and Default by the Corporate Debtor:The financial creditor provided detailed documentation of the financial debt amounting to Rs. 675,57,51,695.39, with the date of default being December 31, 2017. Various loan agreements, sanction letters, restructuring agreements, and other financial documents were submitted as evidence of the debt and default.3. Classification of the Account as NPA:The corporate debtor's account was classified as a Non-Performing Asset (NPA) on March 31, 2018. The financial creditor's counsel argued that despite restructuring efforts under the Corporate Debt Restructuring (CDR) mechanism and the Scheme for Sustainable Structuring of Stressed Assets (S4A), the corporate debtor's performance deteriorated, leading to the classification as NPA.4. Admissibility of the Application under Section 7 of the IBC, 2016:The Tribunal examined whether the application was filed within the limitation period. Following the Supreme Court's decisions in Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd. and B. K. Educational Services P. Ltd. v. Parag Gupta and Associates, it was determined that the right to sue accrued on March 31, 2018, and the application filed on July 24, 2020, was within the three-year limitation period.5. Appointment of Interim Resolution Professional (IRP):The financial creditor proposed Mr. Krishnasamy Vasudevan as the IRP, who provided his written consent. The Tribunal appointed him to take forward the CIRP process, directing him to follow the statutory requirements and file a report within 20 days.6. Declaration of Moratorium:Upon admitting the application, the Tribunal declared a moratorium under Section 14(1) of the IBC, 2016. The moratorium included:- Suspension of suits or proceedings against the corporate debtor.- Prohibition on transferring or disposing of the corporate debtor's assets.- Prevention of actions to foreclose or enforce security interests.- Protection of the corporate debtor's property from recovery actions.The moratorium would remain effective until the completion of the CIRP or until an order for liquidation or approval of a resolution plan was passed.Conclusion:The Tribunal admitted the application under Section 7 of the IBC, 2016, initiating the CIRP against the corporate debtor, appointing an IRP, and declaring a moratorium. The order emphasized the existence of a financial debt and default, and the corporate debtor's inability to repay its dues, thus triggering the insolvency resolution process.