2022 (5) TMI 1046 - Tri - Insolvency and Bankruptcy

Adjudicating Authority initiates Corporate Insolvency Resolution Process under Insolvency and Bankruptcy Code

United Bank of India Versus Progress Cultivation Limited

The Adjudicating Authority admitted the Company Petition under section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Service of notice - HELD THAT:- On several failed attempts of physical service and service by post by the Financial Creditor, this Adjudicating Authority vide order dated 23 February, 2022, directed service on the Corporate Debtor by way of newspaper publication, in the district in which the registered Office of the Corporate Debtor is situated. In pursuance of such order, the publications were made in 'Indian Express' and 'Aajkal' on 17 March, 2022, however, none appeared on behalf of the Corporate Debtor - Further, upon perusal of the record it is apparent that transaction held between the parties squarely falls under the definition of financial transaction and the default subsists. Further, the date of default is stated to be 19 July, 2014 but the Corporate Debtor paid a sum of Rs. 24,700/- on 31 January, 2017, which is within the period of limitation. It is also pertinent to mention that there have been a series of cash deposits in the loan account on earlier occasions also and as such, this is not construed as an isolated event. The payment by the Corporate Debtor before expiration of the prescribed period of limitation would attract the 'Acknowledgement' under the limitation Act, 1963 and would result into a fresh period of limitation. The present petition made by the Financial Creditor is complete in all respects as required by law. The Petition establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under section 4 (1) of the Code, stipulated at the relevant point of time. Application admitted - moratorium declared. Issues involved:Company petition under section 7 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process due to default in repayment by the Corporate Debtor.Analysis:The Company Petition was filed by the Financial Creditor against the Corporate Debtor, citing default in repayment of a credit facility. The Financial Creditor claimed a total amount of Rs. 6,38,96,634.33, including interest. The authorised share capital and paid-up capital of the Corporate Debtor were also mentioned in the Petition. The Financial Creditor provided details of the loan agreement, securities created, and the default in maintaining financial accounts, leading to classification as a Non Performing Asset (NPA). Additionally, legal actions taken by the Financial Creditor, such as filing an application under the Recovery of Debts due to Banks & Financial Institutions Act, 1993, and taking possession of secured assets under the SARFAESI Act, were highlighted.The Adjudicating Authority heard the submissions of the Financial Creditor and reviewed the case records. Despite failed attempts at physical and postal service to the Corporate Debtor, the Authority directed newspaper publication for service. The Authority found that the transaction between the parties fell under financial transaction definitions, and the default date was within the limitation period due to a partial payment made by the Corporate Debtor. Citing a legal precedent regarding acknowledgment under the Limitation Act, the Authority concluded that the Petition was complete and established the Corporate Debtor's default as required by law.Consequently, the Adjudicating Authority admitted the Company Petition, initiating the Corporate Insolvency Resolution Process against the Corporate Debtor. A moratorium was imposed, and an Interim Resolution Professional (IRP) was appointed. The management of the Corporate Debtor was vested in the IRP, who was tasked with submitting periodical reports on the CIRP progress. The Financial Creditor was directed to deposit funds with the IRP for expenses, and various notifications and compliance measures were outlined. The case was scheduled for a future hearing for filing the periodical report, and the issuance of a certified copy of the order was subject to compliance with formalities.