Tribunal Orders Corporate Insolvency Resolution Process (CIRP) with Moratorium and New IRP

The Tribunal admitted the application for Corporate Insolvency Resolution Process (CIRP), imposed a moratorium, appointed a new Interim Resolution Professional (IRP), directed management to vest in the IRP during CIRP, and required quarterly progress reports. The Financial Creditor was instructed to deposit funds for public notice expenses, and compliance measures were outlined. The Tribunal communicated the order to relevant parties and disposed of the application for a change in the proposed IRP, scheduling a progress report filing for a future date.

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Issues:
Initiation of Corporate Insolvency Resolution Process under section 7 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

Issue 1 - Initiation of CIRP:
The Financial Creditor filed a petition under section 7 of the Insolvency and Bankruptcy Code, 2016 seeking Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to default amounting to Rs. 32,10,267. The default occurred from 10.10.2016 to 13.02.2017. The Financial Creditor provided a loan to the Corporate Debtor for the construction of a Micro Brewery, which was to be repaid through weekly installments. Despite promises from the Corporate Debtor, no payments were made, leading to the application for CIRP.

Issue 2 - Arguments by Financial Creditor:
The Financial Creditor argued that the default in repayment constituted a financial debt default under section 7 of the IBC, 2016. The evidence of loan disbursement and cheques presented by the Corporate Debtor supported the claim for admission of the application. Additionally, the Financial Creditor highlighted the need for a new Interim Resolution Professional (IRP) due to the expiry of the present IRP's authorization.

Issue 3 - Arguments by Corporate Debtor:
The Corporate Debtor admitted receiving financial assistance for business expansion but contended that there was no written agreement for the loan. The Corporate Debtor claimed to have made payments through NEFT and cash, which were not acknowledged by the Financial Creditor. They argued that substantial repayments were made, rendering the application non-maintainable.

Issue 4 - Findings and Conclusion:
The Tribunal found that the loan disbursement, the nature of the debt, and the repayment period were undisputed. Despite claims of partial repayment in cash, the Corporate Debtor failed to provide substantial evidence to support these assertions. The lack of documentation and denial of loan repayment by the Financial Creditor raised doubts about the Corporate Debtor's claims. The Tribunal concluded that a debt was due and payable, meeting the threshold for admission under the IBC, and approved the appointment of a new IRP.

Outcome:
The Tribunal admitted the application for CIRP, imposed a moratorium, appointed a new IRP, directed the management to vest in the IRP during CIRP, and required quarterly progress reports. The Financial Creditor was instructed to deposit funds for public notice expenses, and compliance measures were outlined. The Tribunal communicated the order to relevant parties and disposed of the application for a change in the proposed IRP, scheduling a progress report filing for a future date.

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