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2020 (2) TMI 636 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - The Applicant RBI in the capacity of Appropriate Regulator has submitted this Application against the 'Financial Service Provider' Dewan Housing Finance Corporation Limited on account of the fact that the default in repayment of the ECB Loan to SBI was committed, therefore, after following the due procedure as discussed prayed for Admission of the Petition u/s 7 to be read with Section 227 of the Insolvency Code. On due examination of the evidences annexed with this Application we hereby hold that the Debt in question is to be qualified as Financial Debt as defined u/s. 5(8) to be read with Section 3(11) of The Code. Further, on the basis of the correspondence and the Letters issued it has also been established that the FSP has committed Default of repayment as defined u/s. 3(12) of The Code. Application admitted - moratorium declared.
Issues Involved:
1. Applicability of Insolvency & Bankruptcy Code (IBC) to Financial Service Providers (FSPs). 2. Establishment of debt and default by Dewan Housing Finance Corporation Ltd. (DHFL). 3. Appointment of an Administrator for the Corporate Insolvency Resolution Process (CIRP). 4. Moratorium commencement and its implications. 5. Public announcement and claims submission process. Detailed Analysis: 1. Applicability of Insolvency & Bankruptcy Code (IBC) to Financial Service Providers (FSPs): The petition was submitted by the Reserve Bank of India (RBI) to initiate the Corporate Insolvency Resolution Process (CIRP) against Dewan Housing Finance Corporation Ltd. (DHFL) under the Insolvency & Bankruptcy Code, 2016. The Tribunal examined the applicability of newly introduced provisions and notifications under the IBC, specifically Section 227, which empowers the Central Government to notify financial service providers for insolvency proceedings. The Ministry of Corporate Affairs issued a notification on 15.11.2019, formulating the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019. These rules apply to financial service providers notified by the Central Government, and an Administrator must be appointed to oversee the insolvency process. 2. Establishment of Debt and Default by Dewan Housing Finance Corporation Ltd. (DHFL):The RBI, as the "Appropriate Regulator," submitted the application against DHFL, citing significant defaults on financial debt, particularly to the State Bank of India (SBI). The petition included specific details of the default, such as an interest default of USD 2.16 million on an external commercial borrowing facility. Supporting documentation from SBI confirmed the default. The Tribunal noted that the Central Government, in consultation with RBI, had notified non-banking finance companies, including housing finance companies with assets of ?500 crores or more, to be subject to insolvency proceedings under the IBC. 3. Appointment of an Administrator for the Corporate Insolvency Resolution Process (CIRP):The RBI superseded DHFL's Board of Directors and appointed Mr. R. Subramaniakumar as the Administrator. The Tribunal confirmed his appointment, noting that the Administrator would have the same duties, functions, obligations, responsibilities, rights, and powers as an Insolvency Professional. The Tribunal also referenced the formation of an Advisory Committee to assist the Administrator, comprising members with expertise in finance, economics, accountancy, law, public policy, and financial services. 4. Moratorium Commencement and Its Implications:Upon admitting the application, the Tribunal pronounced that a "Moratorium" as defined under Section 14 of the IBC would commence from the date of the application (29.11.2019). This moratorium prohibits the institution or continuation of suits or proceedings against DHFL, the transfer or disposal of any assets, and actions to foreclose or enforce security interests. Essential goods or services to DHFL must continue uninterrupted during the moratorium period, which will last until the completion of the insolvency process. 5. Public Announcement and Claims Submission Process:The Administrator was directed to make a public announcement immediately, as per Section 13 of the IBC, to inform about the initiation of the CIRP and call for claims submission. The announcement must include the name and address of DHFL, information about the Administrator, and the last date for claims submission. The Administrator must update the list of depositors and the outstanding amounts payable to each to ensure their interests are considered along with other stakeholders. Conclusion:The application CP (IB)-4258/MB/2019 was admitted, initiating the CIRP against DHFL under the IBC, with the appointment of Mr. R. Subramaniakumar as the Administrator and the commencement of a moratorium.
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