2020 (6) TMI 649 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - The Financial Debt ought to have been repaid by the Corporate Debtor to the Applicant in accordance with the Repayment schedule annexed to the facility Agreements. The Corporate Debtor failed to repay the amounts due as per the repayment schedules and the defaulted in payment of the Financial Debt. The last date of payment received by the Applicant is 24-11-2017. The CIBIL Report issued by TransUnion CIBIL reflects that the Corporate Debtor s assets are classified as Sub-Standard. The Applicant issued Notice dated 24-04-2017 demanding repayment under the 3 Agreements. However the Applicant has not received any payments - as per section 7 of the I B Code 2016 the contention of the Corporate Debtor that the debt is disputed is not maintainable as the existence of a dispute is of no consequence in an application filed under section 7 of the Code. The Application filed under sub-section (2) of section 7 of I B Code 2016 is complete. The existing financial debt of more than Rupees One Lakh against the corporate debtor and its default is also proved. Accordingly the application filed under section 7 of the Insolvency and Bankruptcy Code for initiation of Corporate Insolvency Resolution Process against the corporate debtor deserves to be admitted. Application admitted - moratorium declared.

Summary

Issues:
1. Application under section 7 of Insolvency & Bankruptcy Code, 2016 filed by a Financial Creditor against a Corporate Debtor for initiating Corporate Insolvency Resolution Process.

Analysis:
The Financial Creditor, a Non-Banking Financial Company, filed an Application under section 7 of the Insolvency & Bankruptcy Code, 2016 against the Corporate Debtor, claiming a substantial amount as due. The Financial Creditor extended financial assistance to the Corporate Debtor under three Agreements, with the last payment received on 24-11-2017. Despite issuing notices for repayment, the Corporate Debtor failed to fulfill its financial obligations. The Commercial Credit Information Report by TransUnion CIBIL confirmed the default status of the Corporate Debtor's assets.

Legal Precedent:
Referring to the case of Innoventive Industries Ltd. v. ICICI Bank, it was highlighted that in cases of default by a Corporate Debtor, the adjudicating authority must ascertain the occurrence of default based on evidence provided by the Financial Creditor. The existence of a dispute does not affect the application under section 7 of the Code.

Resolution:
The Tribunal found the Application complete under section 7 of the I&B Code, with the financial debt exceeding the threshold and default being proven. Consequently, the Application for initiating Corporate Insolvency Resolution Process against the Corporate Debtor was admitted. A moratorium was declared under section 14 of the I&B Code, prohibiting various actions against the Corporate Debtor, and an Interim Resolution Professional was appointed to oversee the resolution process.

Conclusion:
The Tribunal's decision to admit the Application and declare a moratorium signifies the initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor. The appointment of an Interim Resolution Professional aims to facilitate the resolution proceedings in accordance with the Insolvency & Bankruptcy Code, 2016.