2019 (12) TMI 1364 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Financial Debt - existence of debt and dispute or not - HELD THAT - In the instant Petition the Petitioner has proved its case by placing documentary evidence viz. Copies of Facility Agreements and sanction letters date and details of all disbursements of the facilities etc. and copies of entries in Bankers Book in accordance with the Bankers Books Evidence Act 1891 (18 of 1891) which proves that a default has occurred for which the present Corporate Debtor was liable to pay. In their counter affidavit the Respondents have not denied the facts regarding the existence of financial debt and default committed by the Corporate Debtor - the learned counsel for the Corporate Debtor had sought time for settling the debt with the Financial Creditor. It is a different matter that settlement talks have not fructified but the very attempt by the Corporate Debtor to get it settled establishes the debt and default . In the present case this Adjudicating Authority is satisfied with the submissions put forth by the Petitioner/Financial Creditor regarding existence of financial debt and occurrence of default . Further the Financial Creditor has fulfilled all the requirements as contemplated under IB Code - instant petition is hereby admitted and this Adjudicating Authority Orders the commencement of the Corporate Insolvency Resolution Process which shall ordinarily get completed as per the time line stipulated in section 12 of the IB Code 2016 reckoning from the day this order is passed.

Issues Involved:
1. Existence of Financial Debt and Default
2. Maintainability of the Petition
3. Pre-existing Dispute and Limitation
4. One-Time Settlement (OTS) Proposal
5. Authorization of the Petition
6. Admissibility under Insolvency and Bankruptcy Code (IBC), 2016

Detailed Analysis:

1. Existence of Financial Debt and Default:
The Petitioner, M/s. Pegasus Assets Reconstruction Private Limited, filed a petition against M/s. Divya Jyoti Steels Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Corporate Debtor had defaulted on loans amounting to Rs. 500 Lakhs and Rs. 450 Lakhs, which were classified as Non-Performing Assets by the original lender, Karur Vysya Bank, on 28.02.2013. The loans were assigned to the Petitioner on 30.09.2013. Despite a Recovery Certificate issued by the Debts Recovery Tribunal (DRT) for Rs. 7,14,47,960/- on 16.12.2017, the outstanding amount remained unpaid. The Petitioner provided documentary evidence, including agreements and sanction letters, proving the existence of financial debt and default. The Tribunal found that the Petitioner had established the debt and default, as the Corporate Debtor did not deny these facts in their counter affidavit.

2. Maintainability of the Petition:
The Respondent argued that the petition was not maintainable due to discrepancies in the claimed outstanding amount and alleged suppression of material facts. The Respondent pointed out that the total outstanding amount mentioned in the petition did not match the sum of individual components. However, the Tribunal found that the discrepancies did not affect the maintainability of the petition, as the primary issue was the existence of financial debt and default.

3. Pre-existing Dispute and Limitation:
The Respondent claimed that the petition was barred by limitation and that there was a pre-existing dispute regarding the claim amount. The Petitioner countered that the Recovery Certificate issued by the DRT and the payments made by the Corporate Debtor towards the OTS proposal extended the limitation period. The Tribunal referred to the Supreme Court's judgment in Innoventive Industries Ltd. vs. ICICI Bank & Anr., stating that the existence of a dispute could not be a ground for non-admission of an application under Section 7 of the IBC. The Tribunal found that the petition was within the limitation period and that the pre-existing dispute did not bar the admission of the petition.

4. One-Time Settlement (OTS) Proposal:
The Respondent submitted that they had proposed a One-Time Settlement (OTS) to resolve the dispute, which was accepted by the Petitioner. However, the Respondent failed to make the required payments under the OTS proposal, leading to its cancellation by the Petitioner. The Tribunal noted that the Respondent's attempts to settle the debt through the OTS proposal further established the existence of debt and default.

5. Authorization of the Petition:
The Respondent contended that the petition was filed without proper authorization. The Petitioner provided valid authorization documents, including a written consent from the proposed Interim Resolution Professional (IRP). The Tribunal found that the petition was duly authorized and rejected the Respondent's contention.

6. Admissibility under Insolvency and Bankruptcy Code (IBC), 2016:
The Tribunal, satisfied with the existence of financial debt and default, admitted the petition under Section 7 of the IBC. The Tribunal appointed Mr. Narender Gandhari as the Interim Resolution Professional (IRP) and declared a moratorium under Section 14 of the IBC, prohibiting certain actions against the Corporate Debtor. The Tribunal directed the IRP to take charge of the Corporate Debtor's management and comply with the provisions of the IBC.

Conclusion:
The Tribunal admitted the petition filed by the Financial Creditor, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Tribunal appointed an IRP and declared a moratorium, ensuring that the CIRP would proceed as per the provisions of the IBC. The Tribunal's decision was based on the established existence of financial debt and default, the maintainability of the petition, and compliance with the requirements of the IBC.

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