2022 (2) TMI 143 - Tri - Insolvency and Bankruptcy

Tribunal Commences Corporate Insolvency Process: Moratorium in Place

The Tribunal admitted the Company Petition and ordered the commencement of Corporate Insolvency Resolution Process against the Corporate Debtor, ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Corporate Debtor requires 6 to 7 months' time for repaying the debt - HELD THAT:- The Counsel when suggested that payment schedule to pay the debt amount in instalments can be furnished, expressed his inability stating that the Corporate Debtor cannot make any payments before 6 or 7 months. He also submits that they have to pay debts to the Operational Creditors also. Hence, it is evident that the Corporate Debtor is not only indebted to the Financial Creditor herein. But also other debts to the Operational Creditor and that the Corporate Debtor is not a viable condition is obvious from the said submitted facts. In these circumstances, there cannot be any other option for the Tribunal except to order for Corporate Insolvency Resolution Process (CIRP). The Company Petition is admitted. The Corporate Insolvency Resolution Process of the Corporate Debtor shall commence from this date and shall be completed within 180 days - moratorium declared. Issues:Initiation of Corporate Insolvency Resolution Process (CIRP) based on default in payment by the Corporate Debtor to the Financial Creditor.Analysis:The Application filed by the Financial Creditor sought the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to default in payment. The Financial Creditor, a Private Limited Company, alleged that the Corporate Debtor failed to make payments as per the invoices raised, invoking Section 7 of the Insolvency and Bankruptcy Code, 2016 along with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.The Corporate Debtor had availed a loan from a bank, which subsequently turned into a non-performing asset (NPA). The Corporate Debtor approached the Financial Creditor for funds to fulfill the bank's settlement offer. Despite receiving the required loan from the Financial Creditor, the Corporate Debtor expressed difficulty in repaying within the agreed timeframe and requested an extension with increased interest rates, which the Financial Creditor accepted.Moreover, the Corporate Debtor had a history of being admitted to Corporate Insolvency Resolution Process (CIRP) previously, with claims submitted to the Interim Resolution Professional. Subsequently, those orders were set aside by the Hon'ble NCLAT, and a significant amount remained due and payable by the Corporate Debtor, attracting interest.During the hearing, the Corporate Debtor acknowledged the debt but requested 6 to 7 months for repayment, citing financial constraints and debts owed to other creditors. The Tribunal noted the Corporate Debtor's financial difficulties and the inability to propose a payment schedule, leading to the decision to order Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.Consequently, the Tribunal admitted the Company Petition and ordered the commencement of Corporate Insolvency Resolution Process against the Corporate Debtor, appointing an Insolvency Resolution Professional to manage the process. The moratorium was declared, and the Directors, Promoters, and other associated persons were directed to cooperate with the appointed professional for the effective resolution of the insolvency process. The order was communicated to the relevant parties for necessary compliance.