2021 (12) TMI 1271 - Tri - Insolvency and Bankruptcy

Tribunal admits petition for Corporate Insolvency Resolution Process, establishes debt and default.

The Tribunal admitted the petition filed by the Financial Creditor against the Corporate Debtor, initiating the Corporate Insolvency Resolution Process ... 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:- In the present case in hand it is noted that the amount were advanced as per agreement on 11.01.2016 for period of 3 years being lock in period at the rate of 2% per month interest rate therefore amount becomes due on 11.01.2019. The Financial Creditor also issued default notice and recalled principal and interest through advocate, however Corporate Debtor has failed to make the payment. In the lights of the Hon’ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (1) TMI 1508 - SUPREME COURT] upholding the Constitutional validity of IBC, the position is very clear that unlike Section 9, there is no scope of raising a ‘dispute’ as far as Section 7 petition is concerned. As soon as a ‘debt’ and ‘default’ is proved, the adjudicating authority is bound to admit the petition. The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount stipulated under section 4(1) of the IBC. Therefore, the debt and default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor. Application admitted - moratorium declared. Issues Involved:1. Barred by Law of Limitation2. No Financial Debt is Due and Payable by Corporate Debtor3. Minimum Threshold for AllotteesDetailed Analysis:1. Barred by Law of Limitation:The Corporate Debtor contended that the petition is barred by the laws of limitation, arguing that the cause of action arose on 8th March 2016, the date of the final installment, which was more than five years ago. They claimed that the Financial Creditor deposited a security cheque to bring the petition within the limitation period, which should be disregarded. In rebuttal, the Financial Creditor argued that the limitation period commenced from 11th January 2019, the date of default as per the loan agreement. They further argued that even if the date of default is considered as the date of cheque bouncing, the application would still be within the limitation period.2. No Financial Debt is Due and Payable by Corporate Debtor:The Corporate Debtor argued that the Financial Creditor failed to prove any financial debt as defined under the Insolvency and Bankruptcy Code, 2016, and that no financial contract was established. They contended that the Letter of Mortgage was superseded by the Letter of Allotment, implying no financial debt was due. The Financial Creditor rebutted by stating that the amounts were advanced as loans, and both the Letter of Mortgage and Letter of Allotment were executed simultaneously to secure the loan amount. They provided evidence of a bounced cheque issued by the Corporate Debtor as partial repayment, reinforcing the existence of a financial debt.3. Minimum Threshold for Allottees:The Corporate Debtor argued that the Financial Creditor, being an allottee, did not meet the minimum threshold for filing the petition under section 7 of the IBC, which requires at least 10% of the total allottees to file jointly. They claimed that the Financial Creditor had contradictory pleas, asserting both allottee and financial creditor statuses. The Financial Creditor countered this by stating that the amount was given as a loan, not for booking a flat, and hence the application was filed in the capacity of a financial creditor, not an allottee. They emphasized that the mortgage and allotment letters were executed to safeguard the loan amount.Judgment:The Tribunal noted that the amount was advanced as per the agreement on 11th January 2016 for a period of three years at an interest rate of 2% per month, making the amount due on 11th January 2019. The Financial Creditor had issued a default notice and recalled the principal and interest through an advocate, but the Corporate Debtor failed to make the payment.The Tribunal referred to the Supreme Court's decision in Swiss Ribbons Pvt. Ltd. & Ors. Vs. Union of India & Ors., which upheld the constitutional validity of the IBC, stating that once a debt and default are proved, the adjudicating authority must admit the petition.The Tribunal found the application complete in all respects, showing that the Corporate Debtor was in default of a debt due and payable, exceeding the minimum amount stipulated under section 4(1) of the IBC. Therefore, the debt and default were established, and the petition was admitted.The Tribunal ordered the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, imposing a moratorium under section 14 of the IBC, appointing an Interim Resolution Professional (IRP), and directing the Financial Creditor to deposit a sum for meeting the expenses of issuing public notice and inviting claims. The Registry was directed to communicate the order to the relevant parties and the Registrar of Companies for updating the Corporate Debtor's Master Data.Conclusion:The petition filed by the Financial Creditor was admitted, and the CIRP was initiated against the Corporate Debtor. The Tribunal found that the debt and default were established, and the petition was not barred by limitation. The arguments regarding the financial debt and the minimum threshold for allottees were dismissed, reinforcing the Financial Creditor's position.