2021 (10) TMI 1080 - Tri - Insolvency and Bankruptcy

Xion Gems & Jewellers: Corporate Insolvency Resolution Process Initiated

The Adjudicating Authority admitted the petition for Corporate Insolvency Resolution Process against 'Xion Gems and Jewellers Pvt. Ltd.' due to default on ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- Mere plain reading of the provisions under section 7 of IBC and Judicial Pronouncements thereon shows that in order to initiate CIRP Under Section 7 the applicant is required to establish that there is a financial debt and that a default has been committed in respect of that financial debt. That while dealing with the said matter, the financial creditor has clearly established that a financial debt in form of Short-Term Loan has been advanced to the Corporate Debtor which can be clearly substantiated by the copies of the Bank statement showing disbursal of Loan amount by the financial Creditor (Annexure-8) and the letter dated 23.04.2021 wherein, the Corporate Debtor expresses its inability to clear dues. It is found that the documents submitted by the Financial Creditor and the Corporate Debtor clearly substantiate the Financial Creditor's claim that the Corporate Debtor has defaulted on repayment of the debt amount, also as the Corporate Debtor himself submitted that due to financial strain they are unable to pay the amount - upon appreciation of the documents placed on record to substantiate the claim, this Adjudicating Authority admits this petition and initiates CIRP on the Corporate Debtor with immediate effect. Application admitted - moratorium declared. Issues:1. Application for Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code 2016 due to alleged default.2. Classification of the debt as a financial debt.3. Authorization of the application by the proper representative.4. Admissibility of the petition and initiation of CIRP.5. Appointment of an Interim Resolution Professional.6. Declaration of moratorium under Section 14 of the Code.Analysis:1. The application was filed by 'M/s. Gogia Leasing Limited' against 'Xion Gems and Jewellers Pvt. Ltd.' for defaulting on a loan amount of Rs. 1,13,35,203 as per a loan agreement. The Respondent failed to repay the loan despite a recall notice, citing financial stress due to the pandemic crisis.2. The Corporate Debtor argued that the debt was not a financial one, but the Loan Agreement clearly indicated otherwise. The Adjudicating Authority found that the debt, along with interest, constituted a financial debt, as evidenced by the loan disbursement and the Respondent's admission of inability to clear dues.3. The Corporate Debtor contended that the application was not presented by the proper authorized representative. However, a resolution authorizing the representative was provided, satisfying the requirement for initiating CIRP under Section 7 of the IBC.4. After reviewing the documents and arguments, the Adjudicating Authority admitted the petition and initiated the Corporate Insolvency Resolution Process due to the established default by the Corporate Debtor and their acknowledgment of financial strain preventing repayment.5. An Interim Resolution Professional, Mr. Deepak Kumar Garg, was appointed as per the Code's requirements, ensuring compliance with Section 7(3)(b) and confirming no pending disciplinary proceedings against the appointed professional.6. The declaration of moratorium under Section 14 of the Code was made, imposing restrictions on legal actions against the Corporate Debtor, asset transfers, enforcement of security interests, and property recovery. Exceptions were noted for essential services and goods supply, as well as certain provisions under the Insolvency and Bankruptcy Code (Amendment) Act, 2018.This detailed analysis of the judgment outlines the key issues, arguments, and decisions made by the Adjudicating Authority regarding the initiation of the Corporate Insolvency Resolution Process and the appointment of an Interim Resolution Professional.