2022 (6) TMI 988 - Tri - Insolvency and Bankruptcy

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 ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- As far as date and amount of disbursement of loan are concerned, the same is not in dispute though there is no written agreement to this effect. Such amount being of the nature of loan is also not in dispute as it is so admitted by the corporate debtor. The repayment period of six months for such loan is also not disputed. From the reply of the corporate debtor, it is also evident that both financial creditor as well as corporate debtor are having a business relationship for some time. The only plea which has been taken by the corporate debtor is that the amount has been paid partly through cheques and partly in cash. As regard to payment made in cash, except making oral submissions, no documentary evidence such as receipt or voucher duly acknowledged by the financial creditor has been brought on record. The claim of repayment of loan remains unsubstantiated by any evidence - there is a debt which is due and payable both in law and in fact and a default has occurred therein. Further, the amount of default is more than the threshold limit as prescribed under section 4 of the Code, at the time of filing of the present application. This application complies with all requirements of the Code read with relevant Rules made thereunder. There is no impediment to the admission of the present application - petition admitted - moratorium declared. 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.