2022 (9) TMI 1125 - Tri - Insolvency and Bankruptcy

Tribunal Initiates Insolvency Proceedings, Appoints Interim Resolution Professional

The Tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the 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 - authorisation of signatory of the petition - date of default mentioned in the petition - HELD THAT:- As per clause 4(c) of the loan agreement dated 06.05.2018, the loan amount is disbursed against the interest calculated @ 3% per month. Further clause 3 of loan agreement dated 06.05.2018 and the certified copy of board resolution dated 14.05.2018 of the corporate debtor authorizing to avail the loan facility from the applicant clearly states that the amount disbursed shall be utilized in the Krbing work, PQC and DLC work, stone pitching, Toe Wall, Darfin chute work at KME Expressway project that has been awarded by Pan India Infra projects Private Limited. It is clear that when a default takes place, and debt becomes due and is not paid, the Insolvency Resolution Process shall begin against the corporate debtor - the present application is complete in all respect. The applicant financial creditor is entitled to move the application against the corporate debtor in view of admitted outstanding financial debt and default of the same by the corporate debtor. In terms of Section 7 (5) (a) of the Code, the instant petition stands admitted - Petition admitted - moratorium declared. Issues Involved:1. Maintainability of the petition on technical grounds.2. Applicability of the Uttar Pradesh Regulation of Money Lending Act, 1976.3. Quantum of debt and its compliance with the pecuniary threshold limit.4. Classification of the debt as 'Financial Debt' and the applicant as 'Financial Creditor'.Detailed Analysis:1. Maintainability of the Petition on Technical Grounds:The corporate debtor contended that the petition was not maintainable due to issues related to the authorization of the signatory and the date of default. The Tribunal referred to the Supreme Court's decision in Dena Bank vs C. Shivakumar Reddy & Anr, which held that there is no bar to the amendment of pleadings or the filing of additional documents in an application under Section 7 of the IBC. The applicant had complied with the Tribunal's order dated 17.05.2022, curing the defects regarding signing and authorization. The amended petition was duly executed and signed by Mr. Pritam Kumar with an authorization letter. Thus, the Tribunal found no merit in the corporate debtor's contention on this technical ground.2. Applicability of the Uttar Pradesh Regulation of Money Lending Act, 1976:The corporate debtor argued that the applicant was subject to the Uttar Pradesh Regulation of Money Lending Act, 1976, which requires registration for money lending. The Tribunal emphasized that Section 238 of the Insolvency and Bankruptcy Code, 2016, provides that the Code has overriding effect over any other law. Citing the Supreme Court's ruling in Indus Biotech (P) Ltd. v. Kotak India Venture (Offshore) Fund, the Tribunal held that the IBC overrides all other laws. Therefore, the Tribunal did not delve into the applicability of the Uttar Pradesh Regulation of Money Lending Act, 1976, and upheld the statutory right of the applicant under Section 7 of the Code.3. Quantum of Debt and Pecuniary Threshold Limit:The corporate debtor contended that the outstanding amount was below the threshold limit of Rs. 1 Crore as prescribed under Section 4 of the Code. The Tribunal noted that the applicant had claimed an amount of Rs. 1,65,53,664/- in Part-IV of Form-1, which included both principal and interest. The Tribunal found that the interest and principal both constitute financial debt under Section 3(12) of the Code. Since the total financial debt in default exceeded the pecuniary threshold limit, the petition was deemed maintainable.4. Classification of the Debt as 'Financial Debt' and the Applicant as 'Financial Creditor':The corporate debtor argued that the debt did not qualify as 'Financial Debt' and the applicant was not a 'Financial Creditor' as per Sections 5(8) and 5(7) of the Code. The Tribunal examined the loan agreement dated 06.05.2018 and supporting documents, noting that the loan was disbursed against interest calculated at 3% per month, which constitutes the time value of money. The Tribunal referred to the Supreme Court's ruling in Jaypee Infratech case, which clarified that a debt must be disbursed against the consideration for time value of money to be classified as 'financial debt'. The Tribunal concluded that the transaction met the criteria for 'Financial Debt' and the applicant was a 'Financial Creditor'.Conclusion:The Tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor. Mr. Sanyam Goel was appointed as the Interim Resolution Professional. The Tribunal declared a moratorium as per Section 14 of the Code and directed the applicant to deposit Rs. 2 Lakhs with the Interim Resolution Professional to cover the initial expenses. The Tribunal emphasized the duty of the Interim Resolution Professional to manage the affairs of the corporate debtor with utmost dedication and in accordance with the provisions of the Code.