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2021 (6) TMI 492 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Financial Creditors - HELD THAT:- "Debt" as per the Code means a liability or obligation in respect of a claim which is due from a person, a 'claim' being a right to payment. Such a right would arise from some agreement between the parties in the transaction. The event which triggers the applicability of the Code is 'occurrence of default'. Section 3(12) of the Code defines 'default' as non-payment of debt, when whole or any part or instalment of the amount of debt has become due and payable and is not repaid by the corporate debtor. The phrase 'debt has become due and payable' means that the debt is payable at the present moment - Also, it is imperative that the agreement, basis which a debt or default is to be determined are acted upon by both sides, as the performance of the obligations by each party may be contingent upon the similar performance by the other party. The default in paying against the schedule of payment after 18 months was contingent upon the release of the Additional Security by the Petitioner as also sale of apartments as per the Escrow Account receipts. But the sale of apartments itself was contingent upon the health of the real estate sector in recent times being severely affected by the Covid 19 pandemic and the ensuing lockdowns. Major decisions have been taken to protect industry from its effects, to inject economic stimulus and to revive the economy. On 24.03.2020 the minimum threshold of default was increased from ₹ 1 Lakh to ₹ 1 Crore, various provisions were modified/suspended, so that Companies facing financial stress due to the pandemic can be supported rather than be pushed into CIRP. Debts are being restructured as per Government guidelines. In the instant case, we are unable to come to a conclusion that the Respondent is insolvent. Its release of charges by the Vijaya Bank Consortium and issue of NOC showed that it had cleared all its dues. A look at the Respondent's long list of assets held by the Petitioner as security itself, with valuation of more than 800 crore, land the developer's share in the project, shows that it possesses huge parcels of land, many times over in value of the loan, apart from the corporate guarantee given by the parent, Mantri Developers Private Ltd. It has invested large amounts in completed and near completion projects, which will convert to liquidity in due course. It is engaged in the construction of several huge projects in Bangalore. There was a steady inflow of receipts, although temporarily affected by the pandemic and lockdowns - Considering its assets, the loan amount is meagre, but can be repaid as and when the apartments are sold or its other assets held as security/additional security are released to it and disposed of. It would be against the objects of the Code to push such an entity into the rigours of insolvency, that too when its liquefiable assets as well as recurring income from sales are entirely held by the Petitioner, with a continuing stream of receipts. In the present case, no case has been made out by the Financial Creditor for initiating CIRP against the Corporate Debtor, especially when the default is contingent upon the Financial Creditor's actions of release of Additional security as per the Sanction Letter and the Loan Agreement, the continuing receipts through the Escrow Account as per the Assignment Agreement; the readiness of the Respondent to pay the debt and seeking a reschedulement and very recent exchanges between the two in this direction; and the ongoing pandemic conditions. Petition is disposed of by directing both Petitioner and the Respondent to work out a repayment methodology so as to clear the debt within a period of six months from the receipt/uploading of this order.
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