2021 (10) TMI 492 - Tri - Insolvency and Bankruptcy

Tribunal Initiates CIRP Against Corporate Debtor for Defaulting on Financial Debt

India Resurgence ARC Private Limited Versus India Steel Corporation Limited

India Resurgence ARC Private Limited Versus India Steel Corporation Limited - [2021] 229 Comp Cas 212 (NCLT - Mum) Issues Involved:1. Default in payment of financial debt by the Corporate Debtor.2. Validity of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.3. Admission of debt and default by the Corporate Debtor.4. Appointment of Interim Resolution Professional (IRP).5. Initiation of Corporate Insolvency Resolution Process (CIRP).Detailed Analysis:1. Default in Payment of Financial Debt by the Corporate Debtor:The petition was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for defaulting on a financial debt amounting to INR 1633,36,24,150.79 as of 31st May 2020. The Financial Creditor provided evidence of loans extended in 2008 and 2013, which were subsequently renewed, enhanced, and restructured. The account was declared a Non-Performing Asset (NPA) on 21.05.2016 by SBI. The debt was acquired by the Financial Creditor from SBI through a Deed of Assignment dated 03.05.2019. Despite multiple notices and restructuring attempts, the Corporate Debtor failed to repay the debt.2. Validity of the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:The Tribunal examined the application and found it complete under sub-section (2) of Section 7 of the Code. The Financial Creditor established the existence of debt and default, fulfilling the essential qualifications for admission under Section 7 of the IBC. The application was filed within the limitation period as per the Limitation Act, 1863, with acknowledgments of debt by the Corporate Debtor.3. Admission of Debt and Default by the Corporate Debtor:The Corporate Debtor admitted its default in servicing the financial obligations towards the debt payable to the Financial Creditor. The Corporate Debtor filed an additional affidavit admitting liability and withdrew objections and the maintainability application. The Corporate Debtor undertook not to challenge the Tribunal's order before any court or tribunal.4. Appointment of Interim Resolution Professional (IRP):The Tribunal appointed Mr. Ajay Joshi as the Interim Resolution Professional (IRP) to carry out the functions under the Insolvency and Bankruptcy Code, 2016. The Operational Creditor was directed to deposit an amount of Rs. 5 Lakhs towards the initial CIRP cost.5. Initiation of Corporate Insolvency Resolution Process (CIRP):The Tribunal ordered the initiation of CIRP against the Corporate Debtor. The order included provisions for the moratorium, prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor, and ensuring the supply of essential goods or services is not terminated during the moratorium period. The management of the Corporate Debtor was vested in the IRP, and the suspended directors and employees were directed to cooperate with the IRP.Conclusion:The Tribunal concluded that the Financial Creditor established the existence of financial debt and default by the Corporate Debtor. The petition was admitted, and the CIRP was initiated against the Corporate Debtor. The IRP was appointed, and a moratorium was imposed as per the provisions of the Insolvency and Bankruptcy Code, 2016. The Registry was directed to communicate the order to both parties and the IRP immediately.