2022 (10) TMI 884 - Tri - Insolvency and Bankruptcy

Loan Agreement Validated, CIRP Initiated Against Corporate Debtor

Reliance Commercial Finance Limited Versus Prapti Fashions Private Limited

The court found that there was a loan agreement between the Financial Creditor and the Corporate Debtor, as evidenced by various documents and ... Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial creditors - existence of debt and dispute or not - existence of loan agreement between the Financial Creditor and Corporate Debtor or not - Financial Creditor disburse any amount to the Corporate Debtor or not? - HELD THAT:- On perusal of the Balance Sheet for the Financial Year 2017-2018, the name of the Financial Creditor is written under the heading for term loans. Hence, there was an agreement for loan between the Corporate Debtor and the Financial Creditor and if there was no disbursal of any amount, the Corporate Debtor would not have sought for restructuring of the loan account on 04 February 2019 - there is a debt and there have been delays in payment of the debt. The other defenses raised by the Corporate Debtor such as filing a declaratory suit are clearly an afterthought and was done after two years from receiving the notice for this Company Petition. The present petition made by the Financial Creditor is complete in all respects as required by law. The Petition establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under section 4 (1) of the Code, stipulated at the relevant point of time - petition admitted - moratorium declared. Issues:1. Whether there was a loan agreement between the Financial Creditor and Corporate DebtorRs.2. Whether the Financial Creditor did not disburse any amount to the Corporate DebtorRs.Analysis and Findings:Issue 1: Whether there was a loan agreement between the Financial Creditor and Corporate DebtorRs.Upon examining the Facility Agreement dated 11 January 2018, it was observed that although the borrower's name was not mentioned on page 46, the Corporate Debtor's details were clearly listed on page 58 under 'DETAILS OF THE BORROWERS,' with Madhuri Commodities Private Limited named as Co-Borrowers. Additionally, the Corporate Debtor's replies to recall notices on 19.02.2019, 01.03.2019, and a restructuring request on 04.02.2019, all indicated clear admission that the Financial Creditor had granted a loan facility to the Corporate Debtor. Furthermore, in a reply filed on 30 December 2019, the Corporate Debtor acknowledged the loan granted by the Financial Creditor via a Loan Facility Agreement dated 04 January 2018. The Financial Year 2017-2018 Balance Sheet also listed the Financial Creditor under term loans. Thus, it was established that there was indeed a loan agreement between the Corporate Debtor and the Financial Creditor.Issue 2: Whether the Financial Creditor did not disburse any amount to the Corporate DebtorRs.The Corporate Debtor's request for loan restructuring on 04 February 2019, which mentioned financial stress and inability to pay the EMI due on 15.01.2019, contradicted its affidavit-in-reply claim of making regular payments without delay. This inconsistency indicated that there was a debt and delays in payment. Additionally, the Board Resolution dated 18 October 2019 authorized Mr. Aditya Vikram Agarwal to handle proceedings under the Code, invalidating the Corporate Debtor's claim about unauthorized signatories. The Corporate Debtor's filing of a declaratory suit and other defenses were deemed afterthoughts, initiated two years after receiving the notice for the Company Petition. Therefore, it was concluded that the Financial Creditor did disburse the loan amount to the Corporate Debtor.Conclusion:The petition filed by the Financial Creditor was found complete and established that the Corporate Debtor defaulted on a debt exceeding the minimum amount stipulated under section 4(1) of the Code. Consequently, the application for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor was admitted. A moratorium under section 14 of the IBC was declared, and Ms. Meera Prasad was appointed as the Interim Resolution Professional (IRP) to carry out the functions as per the Code. The IRP was directed to take full charge of the Corporate Debtor's assets and documents, with police assistance if necessary, and the Financial Creditor was instructed to deposit Rs 3,00,000/- to meet public notice and claim invitation expenses. The order was communicated to relevant parties, and the case was scheduled for a periodical report on 30.11.2022.