Tribunal Upholds Decision on Corporate Insolvency Application

The Tribunal upheld the Adjudicating Authority's decision to admit the application under Section 7 of the I & B Code, 2016, against the Corporate Debtor, ruling that the debt and default were clear. The Tribunal rejected the Appellant's arguments regarding the maintainability of the application, the effect of interim orders, and the quantum of debt and interest calculation. The appeal was dismissed, affirming the initiation of the Corporate Insolvency Resolution Process.

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Issues Involved:
1. Existence of Debt and Default
2. Maintainability of Section 7 Application
3. Effect of Interim Orders and Contempt Proceedings
4. Quantum of Debt and Interest Calculation

Summary:

Existence of Debt and Default:
The Appellant challenged the impugned order dated 13.04.2022, where the Adjudicating Authority admitted the application under Section 7 of the I & B Code, 2016, initiated by the 1st Respondent (Financial Creditor) against the 2nd Respondent (Corporate Debtor). The Financial Creditor had issued a demand notice under SARFAESI Act on 27.01.2015, demanding Rs.16,51,98,135.20/- and subsequently took possession of the mortgaged property. The Corporate Debtor failed to settle the dues, leading to the declaration of the account as a Non-Performing Asset (NPA) on 30.12.2014. The Adjudicating Authority observed that the debt and default were clear, leading to the initiation of the Corporate Insolvency Resolution Process (CIRP).

Maintainability of Section 7 Application:
The Appellant argued that the application under Section 7 was not maintainable as the debt had been repaid in excess, and there were no dues payable. The Appellant also contended that the Financial Creditor had suppressed the date of default and the exact amount in default, rendering the application incomplete. However, the Tribunal held that the existence of debt and default was established, and the application was rightly admitted by the Adjudicating Authority.

Effect of Interim Orders and Contempt Proceedings:
The Appellant pointed out that the Hon'ble Madras High Court had granted an interim injunction on 04.12.2019, restraining the Financial Creditor from taking coercive steps against the Corporate Debtor. Despite this, the Financial Creditor proceeded with the Section 7 application, leading to contempt proceedings. The Tribunal noted that the interim order did not bar the Adjudicating Authority from proceeding with the application under Section 7.

Quantum of Debt and Interest Calculation:
The Appellant argued that the Debt Recovery Tribunal (DRT) had determined that the Financial Creditor was not entitled to any interest from the date of sanction till the date of filing the application, and the Debt Recovery Appellate Tribunal (DRAT) had modified this to allow simple interest at 9% per annum. The Appellant claimed that the dues had been paid as per the DRT's final order, and there was no default. However, the Tribunal held that the order of the DRT merged with the order of the DRAT, and the amount decided by the DRAT remained due and payable.

Conclusion:
The Tribunal concluded that the debt and default were established, and the application under Section 7 of the I & B Code, 2016, was rightly admitted by the Adjudicating Authority. The appeal was dismissed, and the connected interim application for stay was closed.

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