2022 (2) TMI 419 - Tri - Insolvency and Bankruptcy

Tribunal Approves Corporate Insolvency Process: NBFC's Evidence Leads to Moratorium

Intec Capital Ltd. Versus Mac Roof India Private Limited

The Tribunal admitted the application for Corporate Insolvency Resolution Process under Section 7 of the Insolvency & Bankruptcy Code, 2016 against ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Arbitration proceedings proceeded ex parte against respondents - HELD THAT:- The Financial Creditor has properly placed the Loan Agreements, Sanction Letters, Disbursement Details, Loan Recall Notice, Last Payment details, Statement of Dues to establish the default and the Balance sheets for the corporate debtor which acts a proper acknowledgment within the meaning of Section 18 of the Limitation Act, 1963 - Once there is a proper Acknowledgment of the Debt in writing, a fresh limitation period starting from the date of acknowledgment begins i.e. 05.09.2018 (Balance sheet for the year 2017-18), 30.09.2017(Balance sheet for the Year 2016-2017). The petition is filed on 18.11.2019 which is under 3 years of the Limitation period from the last acknowledgment received. There exists a default and evidence of default has already been placed by the financial Creditor. According to Sec. 7(5) if the Adjudicating Authority is satisfied that a default has occurred and the Application is complete in accordance to Sec. 7(2) and 7(3), then Adjudicating Authority may admit such Application. The Application is complete in all respects and there is a failure on the part of Corporate Debtor to make the timely payments of the Loan and follow the repayment Schedule. The Financial Creditor had made several attempts to recover the due amount and served legal notice on the Corporate Debtor but Corporate debtor had never responded to those. Even after passing of the Arbitral Award in favour of the Financial Creditor, Corporate debtor failed to comply with it. Thus it is a fit case to admit CIRP against Corporate Debtor and the application is within the limitation Period - application admitted - moratorium declared. Issues:Initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency & Bankruptcy Code, 2016 based on default payment by the Corporate Debtor.Analysis:The Financial Creditor, a NBFC, filed an application against the Corporate Debtor for defaulting on payments amounting to Rs. 2,69,26,747. The Corporate Debtor had availed finance facilities and loans which were not fully repaid. Despite collateral security, the Corporate Debtor failed to meet repayment schedules, leading to default. The Financial Creditor provided evidence of default, including bounced cheques and non-payment of EMIs. Arbitration awards were issued in favor of the Financial Creditor, yet the Corporate Debtor did not comply. The Financial Creditor also relied on the Corporate Debtor's audited financial statements as acknowledgment of the debt.The Tribunal noted that the Corporate Debtor did not appear or submit a defense, and the Arbitration proceedings proceeded ex parte. The Financial Creditor substantiated the default with loan agreements, sanction letters, and balance sheets, establishing the acknowledgment of debt under the Limitation Act, 1963. The petition was filed within the limitation period from the last acknowledgment received, ensuring compliance with the legal timeframe. Bank statements confirmed the default, and the Financial Creditor met the requirements under Section 7(5) for the Adjudicating Authority to admit the application.The Tribunal found the application complete and justified due to the Corporate Debtor's failure to make timely payments and comply with the repayment schedule. Despite multiple recovery attempts and legal notices, the Corporate Debtor remained non-responsive. Given the Arbitral Awards and ongoing execution proceedings, the Tribunal deemed it appropriate to admit the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor within the limitation period.Consequently, the petition was admitted, triggering a moratorium under Section 14 of the IBC, 2016. The Financial Creditor's proposed Insolvency Resolution Professional (IRP) was appointed, and immediate expenses were directed to be deposited for the IRP. The IRP was tasked with following the Code's provisions and submitting a report to the Adjudicating Authority. The order was to be shared with both parties and the IRP for compliance and further proceedings.