Tribunal admits CIRP application due to loan default, declares moratorium. Respondent's objections deemed unsustainable.

The tribunal admitted the application to initiate Corporate Insolvency Resolution Process (CIRP) against the respondent due to default in repayment of a loan exceeding Rs. 100 lakhs. The appointment of an Interim Resolution Professional (IRP) was made, and a moratorium was declared under Section 14 of the Insolvency and Bankruptcy Code, prohibiting certain actions against the respondent. The objections raised by the respondent regarding the loan agreement clauses, validity of financial statements, admissibility of evidence, and ongoing arbitration were deemed unsustainable by the tribunal.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Default in repayment of loan
3. Interpretation of loan agreement clauses
4. Validity of financial statements and reclassification of loan
5. Admissibility of evidence and Information Utility report
6. Objections regarding arbitration clause and ongoing arbitration
7. Appointment of Interim Resolution Professional (IRP)
8. Declaration of moratorium and its effects

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
M/s Techno Electric & Engineering Co. Ltd. filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate CIRP against M/s. McLeod Russel India Limited. The application was transferred from the Kolkata Bench to the New Delhi Bench.

2. Default in Repayment of Loan:
The applicant and the corporate debtor entered into a loan agreement on 28.09.2018 for an inter-corporate deposit of Rs. 100 crores. The corporate debtor failed to repay the loan by the due date of 31st March 2019. Despite a demand letter issued on April 5, 2019, the corporate debtor did not repay the loan.

3. Interpretation of Loan Agreement Clauses:
The respondent argued that under clauses 16 and 17 of the loan agreement, the loan amount was not yet due as the recovery should first be done from secured assets. The applicant countered that the default occurred due to the violation of clause 9 and other clauses, and clause 17's pre-requisite is the default committed by the respondent.

4. Validity of Financial Statements and Reclassification of Loan:
The respondent claimed that the loan of Rs. 100 crores was not reflected in the applicant's balance sheet for the year ended 31 March 2020, implying a refund or assignment. The applicant clarified that the loan was reclassified under 'other financial assets' and 'other assets,' which did not affect the creditor's rights.

5. Admissibility of Evidence and Information Utility Report:
The applicant provided a certificate of record of default from Information Utility, showing the outstanding amount. The respondent objected to the report, claiming it was addressed to former employees and not the corporate debtor's registered email. The tribunal deemed the certificate valid as the respondent did not challenge it before the appropriate authority.

6. Objections Regarding Arbitration Clause and Ongoing Arbitration:
The respondent cited the arbitration clause in the loan agreement as a defense. However, the tribunal noted that the pendency of arbitration proceedings is not a defense against a Section 7 application, and no evidence of ongoing arbitration was presented.

7. Appointment of Interim Resolution Professional (IRP):
The tribunal appointed Mr. Kanchan Dutta as the IRP, directing him to make a public announcement and perform his functions as per the Code. The applicant was directed to deposit a fee of Rs. 2 lakh for the IRP's immediate expenses.

8. Declaration of Moratorium and Its Effects:
A moratorium was declared under Section 14 of the Code, prohibiting:
- Institution or continuation of suits or proceedings against the respondent.
- Transferring, encumbering, or disposing of the respondent's assets.
- Actions to foreclose, recover, or enforce any security interest.
- Recovery of property occupied by the respondent.

The supply of essential goods or services to the respondent was not to be terminated during the moratorium period. The IRP was tasked with protecting and preserving the value of the respondent's property and conducting proceedings with utmost dedication and honesty.

Conclusion:
The tribunal found the application complete and the default amount exceeding Rs. 100 lakhs. The objections raised by the respondent were not sustainable, and the application to initiate CIRP was admitted.

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