2022 (7) TMI 574 - Tri - Insolvency and Bankruptcy

NCLT admits petition against Private Limited Company for defaulting on credit facilities

The Mumbai Bench of the National Company Law Tribunal (NCLT) had jurisdiction over a case involving a Private Limited Company that defaulted on credit ... 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:- The Financial Creditor has established that the Credit facilities were sanctioned and duly disbursed to the Corporate Debtor and there has been default in repayment of Debt on the part of the Corporate Debtor - the nature of Debt is a “Financial Debt” as defined under section 5 (8) of the Code. It has also been established that there is a “Default” as defined under section 3 (12) of the Code on the part of the Debtor. The two essential qualifications, i.e. existence of ‘debt’ and ‘default’, for admission of a petition under section 7 of the I&B Code, have been met in this case. Hon’ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (1) TMI 1508 - SUPREME COURT] held that in section 7 of the Petition when the debt and default is proved the Adjudicating Authority bound to admit the Petition. Unlike section 9 where the scope to look into, disputes which is necessary to be considered before admission of the Petition - In view of the above, the facts and present Petition reveals that the Corporate Debtor has admitted the debt and the same is due and payable. The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount stipulated under section 4(1) of the IBC. Therefore, the debt and default stands established and there is no reason to deny the admission of the Petition - petition admitted - moratorium declared. Issues Involved:1. Jurisdiction of the Tribunal.2. Sanction and disbursement of credit facilities.3. Default in repayment by the Corporate Debtor.4. Restructuring of credit facilities.5. Legal actions initiated by the Financial Creditor.6. Acknowledgment of debt by the Corporate Debtor.7. Filing of additional documents.8. Admission of the petition under Section 7 of the IBC.9. Appointment of Interim Resolution Professional (IRP).10. Moratorium under Section 14 of the IBC.Detailed Analysis:1. Jurisdiction of the Tribunal:The Corporate Debtor is a Private Limited Company incorporated under the Companies Act, 1956, with its registered office in Solapur, Maharashtra. Therefore, the Mumbai Bench of the National Company Law Tribunal (NCLT) has jurisdiction to deal with this petition.2. Sanction and Disbursement of Credit Facilities:The Financial Creditor sanctioned credit facilities aggregating to Rs. 1573.42 Lakhs to the Corporate Debtor for setting up a plant for the production of jaggery. The credit facilities were sanctioned through various letters dated 28.05.2010, 15.03.2011, and 25.01.2012, with specific repayment schedules and interest rates.3. Default in Repayment by the Corporate Debtor:The Corporate Debtor defaulted in repaying the credit facilities. As of 31.08.2018, the outstanding amount, including interest, was Rs. 2416.78 Lakhs. The defaults occurred on different dates for various loans, as detailed in the petition.4. Restructuring of Credit Facilities:The Financial Creditor restructured the credit facilities on 27.02.2012, extending the timeline for repayment. Despite this, the Corporate Debtor defaulted again and issued post-dated cheques, which were dishonored due to insufficient funds.5. Legal Actions Initiated by the Financial Creditor:The Financial Creditor initiated actions under the Maharashtra State Cooperative Societies Act, 1912, and the SARFAESI Act, 2002. Additionally, a criminal complaint was filed against the Corporate Debtor and its Directors under various sections of the Indian Penal Code for illegally disposing of the stock of jaggery powder.6. Acknowledgment of Debt by the Corporate Debtor:The Corporate Debtor acknowledged its debt in its balance sheets for the years 2015 to 2018 and expressed interest in a One-Time Settlement through letters dated 29.12.2016 and 07.09.2018. This acknowledgment extended the limitation period for filing the petition.7. Filing of Additional Documents:The Financial Creditor filed additional documents, including entries from its books and balance sheets of the Corporate Debtor, before the admission of the petition. The Supreme Court's decision in Dena Bank vs. C. Shivakumar Reddy and Anr. allowed the filing of such additional documents.8. Admission of the Petition Under Section 7 of the IBC:The Tribunal concluded that the Financial Creditor had established the existence of a 'Financial Debt' and a 'Default' as defined under the IBC. The petition met the essential qualifications for admission under Section 7 of the IBC.9. Appointment of Interim Resolution Professional (IRP):Mr. Vinit Gangwal was proposed and appointed as the IRP. He provided written consent and a copy of his Certificate of Registration as required by law.10. Moratorium Under Section 14 of the IBC:A moratorium was declared, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovering property by owners. Essential goods and services to the Corporate Debtor were to continue uninterrupted. The moratorium would remain in effect until the completion of the CIRP or further orders.Order:The petition filed by the Financial Creditor was admitted, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Tribunal ordered various procedural steps, including public announcement of the CIRP, communication of the order to relevant parties, and compliance by the Registrar of Companies.