2021 (6) TMI 528 - Tri - Insolvency and Bankruptcy

Tribunal Admits Financial Creditor's Petition, Initiates Corporate Insolvency Resolution Process

The Tribunal admitted the Petition filed by the Financial Creditor, finding the existence of financial debt and default by the Corporate Debtor. An ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - real estate project - existence of debt and dispute or not - HELD THAT:- It is undisputed fact that the Petitioner had granted a short term loan to the Corporate Debtor for general corporate purposes for real estate projects by way of a Sanction Letter dated 15.04.2019 and thereafter, executed a facility agreement dated 16.04.2019 wherein the total amount of ₹ 15 crores were lent by the Petitioner to the Corporate Debtor. In terms of the facility agreement, the Petitioner paid the amounts as per the drawdown at clause 2.3 of facility agreement - The Facility Agreement was executed for a fixed term of 6 months and therefore, it can be construed that upon maturity, the money would be repaid by the Corporate Debtor to the Petitioner. The Facility Agreement also provides for events of default wherein the Petitioner could seek the payment of entire amounts on account of breaches of performance of obligations by the Corporate Debtor. Upon perusal of Facility Agreement and security created in pursuance of monies lent to the Corporate Debtor, it is established beyond doubt that the Facility Agreement executed between the parties entails the details of debt of ₹ 15 Crores, as was sanctioned and disbursed to the Corporate Debtor. The events of default expressly define the rights accrued to the Financial Creditor to recall the entire loan on non-payment of dues by the Corporate Debtor. The Corporate Debtor has also not disputed that he had availed the said monies and hence, has offered to settle the said outstanding amount by way of proposal on 24.02.2021. Hence, all the ingredient of Section 7 are satisfied and Petition is admitted. The nature of Debt is a 'Financial Debt' as defined under section 5(8) of the Code. It has also been established that there is a 'Default' as defined under section 3(12) of the Code on the part of the Debtor. The two essential qualifications, i.e., existence of 'debt' and 'default', for admission of a Petition under section 7 of the I & B Code, have been met in this case - Petition admitted - moratorium declared. Issues Involved:1. Existence of Financial Debt2. Default on Financial Debt3. Admissibility of the Petition under Section 7 of the Insolvency and Bankruptcy Code (IBC)4. Appointment of Interim Resolution Professional (IRP)5. Declaration of MoratoriumIssue-wise Detailed Analysis:1. Existence of Financial Debt:The Petitioner, a Financial Creditor, sanctioned a short-term loan of Rs. 15 crores to the Corporate Debtor for general corporate purposes and real estate projects. This was formalized through a Sanction Letter dated 15.04.2019 and a Facility Agreement dated 16.04.2019. The loan was to be repaid within six months, with interest payable at 18% per annum and additional interest for failure to perfect security. The Corporate Debtor acknowledged the loan and agreed to repay it along with interest through letters dated 23.04.2019.2. Default on Financial Debt:The Corporate Debtor failed to make timely interest payments and did not repay the principal amount by the maturity date of 18.10.2019. Despite several reminders and notices from the Petitioner, including a Recall Notice dated 22.01.2020, the Corporate Debtor did not fulfill its obligations. The Corporate Debtor attempted to attribute the delay to the COVID-19 pandemic but had already defaulted prior to the outbreak. The total amount in default as of 22.10.2020 was Rs. 26,30,11,626.3. Admissibility of the Petition under Section 7 of the IBC:The Tribunal found that the Facility Agreement clearly outlined the terms of the debt and the events of default. The Corporate Debtor did not dispute the existence of the debt and even offered a settlement proposal. The Tribunal concluded that the essential qualifications for admission under Section 7 of the IBC—existence of 'financial debt' and 'default'—were satisfied. The Petition was filed within the period of limitation and was thus admitted.4. Appointment of Interim Resolution Professional (IRP):The Financial Creditor proposed Mr. Abhijit Gokhle as the IRP, who had no disciplinary actions pending against him. The Tribunal appointed Mr. Gokhle to conduct the Insolvency Resolution Process, as required under the Code.5. Declaration of Moratorium:Upon admitting the Petition, the Tribunal declared a Moratorium under Section 14 of the IBC. This prohibits the institution of any suits, transferring/encumbering assets, and ensures the supply of essential goods or services to the Corporate Debtor is not terminated during the Moratorium period. The IRP was directed to make a public announcement of the initiation of the Corporate Insolvency Resolution Process and report the progress within 30 days.Conclusion:The Tribunal admitted the Petition, appointed an IRP, and declared a Moratorium, thus initiating the Corporate Insolvency Resolution Process effective from the date of the Order. The Petition was found to be within the period of limitation and met all the requirements under Section 7 of the IBC.