2022 (6) TMI 1087 - Tri - Insolvency and Bankruptcy

Tribunal Admits CIRP Petition Against Corporate Debtor for Loan Default

The tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, for initiating Corporate Insolvency Resolution Process ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- The Corporate Debtor has raised issue that the Financial Creditor is itself undergoing resolution process. In this regard, it is submitted by the Financial Creditor that at the time of initiation of the present case, the Corporate Debtor was not under CIRP and hence the Corporate Debtor does not fall within the purview of the provisions of Section 11 of the IBC. In any event, explanation II of Section 11 of the IBC categorically clarifies that nothing in this Section shall prevent the Corporate Debtor, referred to in Clauses (a) to (d) of the said Section from initiating CIRP against another Corporate Debtor. Therefore, it is clear from the statute itself that the fact that the Financial Creditor herein is undergoing resolution process itself, is not a bar to maintain the instant application against the Corporate Debtor. In the present case, the Corporate Debtor was and is unable to show that there was no default and on the contrary, the Corporate Debtor has admitted the default in repayment of loan on its part. It is apparent that the Corporate Debtor is unable to repay the loan amount and has committed default and the present petition is, therefore, deserves to be admitted for CIRP. Petition admitted - moratorium declared. Issues Involved:1. Existence of financial debt and default by the Corporate Debtor.2. Legality of notices issued under SARFAESI Act, 2002.3. Impact of Financial Creditor's own resolution process on the current proceedings.4. Appointment of Interim Resolution Professional (IRP) and initiation of Corporate Insolvency Resolution Process (CIRP).Detailed Analysis:1. Existence of Financial Debt and Default by the Corporate Debtor:The Financial Creditor, Reliance Home Finance Limited, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Raghav Sarees Private Limited. The Financial Creditor had sanctioned a loan of Rs. 1,75,00,000/- to the Corporate Debtor, which was secured by mortgaging a commercial property. The Corporate Debtor initially made payments but defaulted on the instalments from 5th August 2018, leading to the loan account becoming a Non-Performing Asset (NPA) on 8th January 2019. Despite multiple notices, the Corporate Debtor failed to clear the dues, resulting in an outstanding amount of Rs. 2,87,72,816.65 as of 18th September 2019. The Corporate Debtor admitted the existence of the loan and default in repayment, which was evident from their own statements and letters seeking time to repay the loan.2. Legality of Notices Issued under SARFAESI Act, 2002:The Corporate Debtor challenged the legality of the notices issued under the SARFAESI Act, 2002, claiming they were unsigned and illegal. They argued that the Financial Creditor had misused a blank cheque and issued a false notice demanding Rs. 1,80,75,016/-. However, the tribunal observed that the disputes raised by the Corporate Debtor were sham and frivolous, and the default in repayment was evident.3. Impact of Financial Creditor's Own Resolution Process on the Current Proceedings:The Corporate Debtor argued that the Financial Creditor was undergoing its own resolution process, which should bar it from initiating CIRP against another Corporate Debtor. However, the tribunal clarified that Section 11 of the IBC does not prevent a Corporate Debtor undergoing resolution from initiating CIRP against another Corporate Debtor. Therefore, the Financial Creditor's resolution process did not impact the maintainability of the current application.4. Appointment of Interim Resolution Professional (IRP) and Initiation of CIRP:The tribunal appointed Mr. Niraj Kumar Agrawal as the Interim Resolution Professional (IRP) and declared a moratorium in accordance with Sections 13 and 15 of the IBC. The moratorium prohibits the institution or continuation of suits, transferring or disposing of assets, and recovery of property by owners or lessors. The IRP is tasked with making a public announcement, convening a Committee of Creditors, and identifying a prospective Resolution Applicant within 105 days from the insolvency commencement date. The Financial Creditor was directed to deposit Rs. 5,00,000/- with the IRP for preliminary expenses and fees.Orders Passed:- The application under Section 7 of the IBC for initiating CIRP against the Corporate Debtor is admitted.- A moratorium is declared as per Sections 13, 14, and 15 of the IBC.- Mr. Niraj Kumar Agrawal is appointed as the IRP.- The Financial Creditor is directed to deposit Rs. 5,00,000/- with the IRP.- The registry is instructed to communicate the order to all concerned parties.- The matter is listed for the filing of the progress report on 02/08/2022.The tribunal concluded that the Corporate Debtor had defaulted in repayment of the loan and the petition deserved to be admitted for CIRP.