2022 (7) TMI 308 - Tri - Insolvency and Bankruptcy

Tribunal initiates insolvency proceedings against Corporate Debtor under IBC

Punjab National Bank Versus NCS Sugars Limited

The Tribunal admitted the petition under Section 7 of the Insolvency & Bankruptcy Code, 2016, 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:- There are no hesitation to hold that the applicant has established financial debt of a sum of over Rupees one crore payable by the Corporate Debtor. The Demand Notice dated 12.05.2014 issued under section 13(2) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 issued to the Corporate Debtor remained uncomplied. The Financial Creditor has also offered OTS to the Corporate Debtor. However, the Corporate Debtor failed to make payment in terms of the approved OTS. The Balance Sheet of the Corporate Debtor for the year 2016-2017 filed by the Corporate Debtor at pages 601-635 also disclosed financial debt of the Corporate Debtor in favour of the applicant - Therefore, this record clinchingly establishes not only the existence of financial debt but also its default by the Corporate Debtor. Therefore, this Tribunal is satisfied, a financial debt due and payable by the corporate debtor to the applicant and its default stands established, hence it is a fit case to put the Corporate Debtor in CIRP. Petition admitted - moratorium declared. Issues Involved:1. Whether there is a financial debt as claimed by the applicant due and payable by the respondent/Corporate DebtorRs.2. Whether the Corporate Debtor had defaulted in payment of the sameRs.Issue-wise Detailed Analysis:1. Financial Debt Due and Payable:The Financial Creditor, formerly Oriental Bank of Commerce (now Punjab National Bank), filed a petition to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, M/s. NCS Sugars, under Section 7 of the Insolvency & Bankruptcy Code, 2016. The petition was based on the alleged default in payment of Rs. 226,94,94,093/- as of 31.03.2018. The Financial Creditor had extended loans totaling Rs. 130,37,47,281/- to the Corporate Debtor through various agreements and created charges on immovable properties and hypothecation of goods and assets. The Corporate Debtor's account was classified as Non-Performing Asset (NPA) on 30.12.2013, and a Demand Notice under Section 13(2) of the SARFAESI Act was issued on 12.05.2014. The Corporate Debtor acknowledged its debt in financial statements for the years 2015-16 and 2016-17 but failed to comply with the One-Time Settlement (OTS) proposal approved by the Financial Creditor.2. Default in Payment:The Corporate Debtor argued that the sugar industry crisis led to its financial difficulties, affecting its ability to sustain production and make payments. The Corporate Debtor also cited a Supreme Court order dated 11.09.2018, granting status quo in related proceedings, and invoked force majeure. Despite these arguments, the Tribunal observed that the Corporate Debtor had acknowledged the debt in its financial statements and failed to comply with the approved OTS proposal. The Tribunal referred to the Supreme Court ruling in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd., which stated that the adjudicating authority only needs to verify the occurrence of default based on records or evidence provided by the financial creditor.Judgment:The Tribunal concluded that the Financial Creditor had established the existence of a financial debt and its default by the Corporate Debtor. Consequently, the Tribunal admitted the petition under Section 7 of the Insolvency & Bankruptcy Code, 2016, and declared a moratorium as per Section 14 of the Code. The Tribunal appointed an Interim Resolution Professional (IRP) and directed the public announcement of the initiation of CIRP. The moratorium would remain effective until the completion of the CIRP, approval of the Resolution Plan, or liquidation order, whichever is earlier. The Tribunal also directed the Registry to communicate the order to the Registrar of Companies, Hyderabad, for marking appropriate remarks against the Corporate Debtor on the Ministry of Corporate Affairs website.Conclusion:The Tribunal admitted the petition, initiating CIRP against the Corporate Debtor, and declared a moratorium, appointing an IRP to carry out the functions under the Insolvency & Bankruptcy Code. The decision was based on the established financial debt and default by the Corporate Debtor.