Court allows Creditor's application for Corporate Insolvency Resolution Process under The court allowed the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process ...
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Court allows Creditor's application for Corporate Insolvency Resolution Process under
The court allowed the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process against the Corporate Debtor due to default on a term loan. The Financial Creditor's evidence of default was undisputed, leading to the appointment of an Insolvency Professional as an Interim Resolution Professional. The court imposed a Moratorium under Section 14 of the Code, directing the IRP to manage operations, protect assets, and receive fees from the Financial Creditor. The judgment was signed on December 16, 2021, disposing of pending applications and commencing the CIRP.
Issues: Application under Section 7 of Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) due to default in loan repayment.
Analysis: The Financial Creditor, a Non-Banking Finance Company, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor for defaulting on a term loan of approximately &8377; 2,90,00,000. The loan was to be repaid in sixty monthly installments, but the Corporate Debtor defaulted on the payments. The Financial Creditor issued a notice for recalling the loan, prompting the initiation of the CIRP against the Corporate Debtor. The Corporate Debtor sought to restrain the Financial Creditor from other legal proceedings related to the debt recovery, but the Adjudicating Authority intervened and directed the Corporate Debtor to file a reply.
The Corporate Debtor failed to file a reply despite multiple opportunities and instead requested adjournments based on an ongoing One Time Settlement (OTS) proposal. The Financial Creditor provided evidence of default, which the Corporate Debtor did not dispute, establishing the debt and default. The Financial Creditor proposed the appointment of an Insolvency Professional as an Interim Resolution Professional (IRP), and the Adjudicating Authority approved the appointment, initiating the Corporate Insolvency Resolution Process.
The order included directions for the Moratorium under Section 14 of the Code, prohibiting legal actions against the Corporate Debtor, and ensuring the continuation of essential services. The IRP was tasked with managing the Corporate Debtor's operations and protecting its assets. The Financial Creditor was directed to pay fees to the IRP, and the Registry was instructed to communicate the order to all relevant parties. The CIRP commencement date was set, and pending applications by the Corporate Debtor were disposed of. Consequently, the application under CP (IB) No. 75 of 2020 was allowed, and the judgment was signed on December 16, 2021.
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