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Judgment
ORDER
PER Bidisha Banerjee, Member (Judicial):
This Court congregated through hybrid mode.
Heard the Learned Counsels for both parties.
Factual matrix: This instant application is filed under Section 7 of the Insolvency and Bankruptcy Code, for brevity I&B Code, read with Rule 4 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules, 2016, by “Miller Traders Private Limited”, hereinafter referred to as “Financial Creditor” (“Applicant”/ “FC”) against “Dahisar Traders Private Limited”, hereinafter referred to as “Corporate Debtor” (“Respondent”/ “CD”) seeking direction to initiate Corporate Insolvency Resolution Process (for brevity “CIRP”) in respect of the Corporate Debtor.
4. Submissions of the Ld. Counsel for the Applicant:
The Learned Counsel for the applicant submit that the agreement dated November 8, 2023 a loan agreement was executed between the Corporate debtor and Financial Debtor for a loan facility for a maximum amount of Rs. 1,60,000,00/- . A copy of the loan agreement is annexed and marked as Annexure G.
It is submitted that the request of the corporate debtor, the financial creditor sanctioned a loan facility through an agreement dated November 8, 2023, for a maximum amount of ₹1,60,00,000. Under this agreement, the corporate debtor was required to formally communicate any request for disbursement to the lender at least one day prior to the intended date of disbursement. The tenure of the loan facility was set for a period of eight months.
It is claimed that in pursuance of the aforesaid loan agreement dated November 8, 2024 a total of ₹ 15,850,000 was disbursed in four tranches ("LOAN") which was fully described in the table hereunder: SL.NO. Date Amount
| 1. | November 08, 2024 | 26,00,000/- |
| 2. | November 08, 2024 | 50,00,000/- |
| 3. | November 24, 2024 | 50,00,000/- |
| 4. | November 29, 2024 | 12,50,000/- |
| 5. | March 07, 2024 | 10,00,000/- |
| 6. | March 13, 2024 | 10,00,000/- |
| Total | 1,58,50,000/- |
It is further submitted that the loan became due and payable on July 7, 2024. Subsequently, the financial creditor issued a demand notice dated July 10, 2024, seeking payment of ₹1, 58,50,000, which remained outstanding as of that date. This amount, along with applicable interest, became due as per the terms of the loan agreement dated November 8, 2023. However, the corporate debtor did not respond to the said demand notice. A copy of the said demand notice dated July 10 2024 and July 15, 2024 is annexed as Annexure H.
That the financial creditor issued another demand notice on August 5, 2024, for the outstanding amount and applicable interest is annexured as ANNEXURE I. The corporate debtor acknowledged the notice via a reply dated August 7, 2024, admitting its liability under the loan agreement dated November 8, 2023, and requested additional time or concession due to its strained financial condition is annexed as ANNEXURE J .
It is submitted that the financial creditor issued another demand notice dated September 2, 2024, seeking payment of the outstanding amount of ₹1,58,50,000, along with applicable interest. This notice was sent due to the corporate debtor’s continued default in loan repayment, as per the terms of the loan agreement dated November 8, 2023. A copy of the said demand notice is annexed and marked as ANNEXURE K.
That, as per the Loan Agreement dated November 8, 2023, the Corporate Debtor was obligated to make the repayment as per the agreed schedule, i.e., on July 7, 2024, along with applicable interest and other charges at the specified rate. However, the Corporate Debtor failed to adhere to the terms and conditions outlined in the Facility Agreement, the security documents, and the sanction letter, thereby committing a default.
That the Financial Creditor issued multiple demand notices requiring payment within 7 days, but the Corporate Debtor failed to comply. As per the Loan Agreement dated November 8, 2023, repayments were to be made on the due dates without delay or objection. The Corporate Debtor's failure to make timely payments constitutes a clear breach of the agreement. Bank account statements showing the default are annexed as ANNEXURE L.
5. Per contra, submission advanced by the Learned Counsel appearing on behalf of the Respondent:
The Learned Counsel for the respondent submit that the Corporate Debtor had no intention of defaulting on its financial obligations. However, due to unexpected financial difficulties, it was unable to make the payments within the agreed timeline.
It is submitted that the corporate debtor had acknowledged the debt of Rs. 15,850,000/- letter dated 7th August 2024 and as such cannot turn back from their legal obligations.
It is further submitted that the Corporate Debtor made multiple attempts to communicate with the Financial Creditor. However, no settlement could be reached, as the Corporate Debtor is currently not in a financial position to clear the dues owed to the Financial Creditor.
6. Analysis and Findings
It is evident that there is demand notice dated 10.07.2024, 15.07.2024, 05.08.2024 and 02.09.2024 at page 40-44 of the petition detailing the loan amount, the term interest, and additional charges, in case of any default on part of the corporate debtor.
It is evident from the Loan Agreement (refer Page 31 of the petition, Annexure G) that the loan facility was sanctioned for a period of 8 months. As per the agreed terms, the principal amount along with accrued interest was to be repaid by the Corporate Debtor to the Financial Creditor on or before July 7, 2024. The interest on the loan was to be calculated at the rate of 15% per annum.
The Corporate debtor has not denied its failure to repay the debt. Hence “default” is admitted.
We find no support to the argument made by Ld. Counsel for the Corporate Debtor that the Financial Creditor has given extension for repayment of loan.
Once the “debt’ and “default” is admitted or established the petition must be admitted.
We are supported by the views of Hon’ble Apex Court to define “Financial Debt” and to initiate Corporate Insolvency Resolution process as under:
Pioneer Urban Land and Infrastructure Ltd. v. Union of India reported in (2019) 8 SCC 416:
“any debt to be treated as financial debt, there must happen disbursal of money to the borrower for utilization by the borrower and that the disbursal must be against consideration for time value of money.”
(Emphasis added)
Anuj Jain, Interim Resolution Professional for Jaypee Infratech Ltd. v. Axis Bank Limited reported in (2020) 8 SCC 401:
“the essential condition of financial debt is disbursement against the consideration for time value of money.”
(Emphasis added)
Indus Biotech Private Limited v. Kotak India Venture (Offshore) Fund reported in (2021) 6 SCC 436: MANU/SC/0231/2021 (para 14) that:
“14.… in order to trigger an application, there should be in existence four factors: (i) there should be a 'debt' (ii) 'default' should have occurred (iii) debt should be due to 'financial creditor' and (iv) such default which has occurred should be by a 'corporate debtor…”
(Emphasis added)
Innoventive Industries Ltd. v. ICICI Bank reported in (2018) 1 SCC 407: MANU/SC/1063/2017 has laid down that:
“27.The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. ...’
“28.… the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, ...”
xxx xxx xxx xxx
“30.On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e., payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.”
(Emphasis added)
Further, the date of default is 10.07.2024 whereas this application has been filed on 23.10.2024 which is well within the period of limitation, and therefore, we admit the Corporate Debtor into CIRP.
In terms of the foregoing discussion, we ALLOW the application bearing Company Petition (IB) No. 339/KB/2024 filed under Section 7 of the I&B Code, and accordingly, we order the initiation of Corporate Insolvency Resolution Process (CIR Process) in respect of the Corporate Debtor by the following Orders:
The Application filed by Miller Traders Private Limited (Financial Creditors), under Section 7 of the Insolvency & Bankruptcy Code, 2016, is hereby, ADMITTED for initiating the Corporate Insolvency Resolution Process in respect of Dahisar Traders Private Limited (Corporate Debtor).
As a consequence of this Application being admitted in terms of Section 7 of the I&B Code, moratorium as envisaged under the provisions of Section 14(1) of the Code, shall follow in relation to the Respondent/(CD) as per clauses (a) to (d) of Section 14(1) of the Code. However, during the pendency of the moratorium period, terms of Section 14(2) to 14(3) of the Code shall come into force.
Moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016, prohibits the following, as:
a)The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment decree or order in any court of law, Tribunal, arbitration panel or other authority;
b)Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its asset or any legal right or beneficial interest therein;
c)Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);
d)The recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor.
[Explanation.--For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period;]
The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during the moratorium period.
The provisions of sub-section (1) of the Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
The Applicant has proposed the name of “Mr. Seikh Abdul Salam”, Address: 64 J, Linton Street, Kolkata, West Bengal, 700014, Registration no. IBBI/IPA-003/IP-N00250/2019-2020/12966, Email id salam10695@gmail.com , as the “IRP”. We have perused that there is a written communication and consent of IRP in Form 2 with Affidavit, annexed as letter D at pages 36-38 to the petition, as per the requirement of Rule 9(l) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. There is a declaration made by him that there are no disciplinary proceedings pending against him with the Board or IIIP of ICAI. In addition, further necessary disclosures have been made by “Mr. Seikh Abdul Salam” as per the requirement of the IBBI Regulations. Accordingly, he satisfies the requirement of Section 7(3)(b) of the code. Hence, we appoint “Mr. Seikh Abdul Salam” as the Interim Resolution Professional (IRP) of the Corporate Debtor to carry out the functions as per the I&B Code subject to submission of a valid Authorisation of Assignment in terms of regulation 7A of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016. The fee payable to IRP or the RP, as the case may be, shall be compliant with such Regulations, Circulars and Directions as may be issued by the Insolvency & Bankruptcy Board of India (IBBI). The IRP shall carry out his functions as contemplated by sections 15, 17, 18, 19, 20 and 21 of the I&B Code.
In pursuance of Section 13 (2) of the Code, we direct the IRP or the RP, as the case shall cause a public announcement immediately with regard to the admission of this application under Section 7 of the Code and call for the submission of claims under Section 15 of the Code. The public announcement referred to in Clause (b) of sub-section (1) of Section 15 of the Insolvency & Bankruptcy Code, 2016, shall be made immediately. The expression immediately means within three days as clarified by Explanation to Regulation 6 (1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
During the CIR Process period, the management of affairs of the Corporate Debtor shall vest in the IRP or the RP, as the case may be, in terms of Section 17 of the I&B Code. The officers and managers of the Corporate Debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP within one week from the date of receipt of this Order, in default of which coercive steps will follow. There shall be no future opportunities in this regard.
The Interim Resolution Professional is also free to take police assistance to take full charge of the Corporate Debtor, its assets and its documents without any delay, and this Court hereby directs the concerned Police Authorities and/or the Officer-in-Charge of Local Police Station(s) to render all assistance as may be required by the Interim Resolution Professional in this regard.
The IRP or the RP, as the case may be, shall submit to this Adjudicating Authority periodical report with regard to the progress of the CIR Process in respect of the Corporate Debtor.
The Financial Creditors shall be liable to pay to IRP a sum of Rs. 3,00,000/- (Rupees Three Lakh Only) as payment of his fees as advance, as per Regulation 33(3) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which amount shall be adjusted at the time of final payment. The expenses relating to the CIRP are subject to the approval of the Committee of Creditors (CoC).
In terms of sections 7(5) and 7(7) of the Code, the Registry of this Adjudicating Authority is hereby directed to communicate this Order to the Financial Creditor, the Corporate Debtor and the Interim Resolution Professional by Speed Post and through email immediately, and in any case, not later than two days from the date of this Order.
Additionally, the Registry of this Adjudicating Authority shall serve a copy of this Order upon the Insolvency and Bankruptcy Board of India (IBBI) for their record and also upon the Registrar of Companies (RoC), to whom the company is registered with, by all available means for updating the Master Data of the Corporate Debtor. The said Registrar of Companies shall send a compliance report in this regard to the Registry of this Court within seven days from the date of receipt of a copy of this order.
The Resolution Professional shall conduct CIRP in a time-bound manner as per Regulation 40A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016.
The IRP/RP shall be liable to submit the periodical report including the minutes of the CoC of the Corporate Debtor, with regard to the progress of the CIR Process in respect of the Corporate Debtor to this Adjudicating Authority from time to time.
The order of moratorium shall cease to have effect as per Section 14(4) of the I&B Code.
Certified copies of this order, if applied for with the Registry of this Adjudicating Authority, be supplied to the parties upon compliance with all requisite formalities.
Post the Company Petition on 10/06/2025 for filing the Periodical Progress Report by the IRP/RP as appointed herein.