Tata Capital Housing Finance Ltd. Successfully Initiates CIRP Under IBC for Recovery of Over Rs. 28 Crores
In a significant development, the National Company Law Tribunal (NCLT), Mumbai Bench-VI, has admitted the insolvency petition filed by Tata Capital Housing Finance Limited against Dharan Infra-EPC Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016. The tribunal's decision marks the commencement of the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor for a default amount exceeding Rs. 28 crore. The order came after the tribunal verified the existence of debt and default, despite the corporate debtor's pending arbitration proceedings.
The case, brought forth by Tata Capital Housing Finance Limited, argued that Dharan Infra-EPC Limited had defaulted on its financial obligations, necessitating the initiation of insolvency proceedings. The financial creditor provided substantial evidence, including facility agreements, sanction letters, mortgage deeds, and acknowledgment of debt by the corporate debtor, to establish the default and debt owed.
The NCLT highlighted the corporate debtor's acknowledgment of its financial liabilities on multiple occasions and its efforts to negotiate a one-time settlement, thereby affirming the existence of debt and default. The tribunal dismissed arguments concerning ongoing arbitration proceedings, citing established precedents that such proceedings do not impede the initiation of CIRP under Section 7 of the IBC.
In its detailed order, the NCLT emphasized the adjudicating authority's limited role in assessing the existence of debt and default, referring to the Supreme Court's ruling in Innoventive Industries Ltd. v. ICICI Bank Ltd., which mandates the admission of insolvency applications upon satisfaction of these criteria.
The tribunal also addressed the issue of limitation, ruling that the application was filed within the three-year limitation period prescribed under the IBC, as the default date was established as February 7, 2023, coinciding with the classification of the loan accounts as Non-Performing Assets (NPA).
Following the admission of the petition, the NCLT has declared a moratorium on the corporate debtor's assets and operations, prohibiting the continuation of suits, transfer of assets, foreclosure actions, and recovery of property occupied by the corporate debtor. The tribunal appointed Mrs. Palak Swapnil Desai as the Interim Resolution Professional (IRP) to oversee the insolvency process, ensuring compliance with the IBC regulations.
The tribunal's decision underscores the robust framework of the IBC in addressing corporate insolvency issues and reaffirms the legislative intent to facilitate timely resolution of financial distress, thereby protecting the interests of creditors.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Application under Section 7 - Financial Creditor establishing existence of debt and default exceeding the threshold limit of Rs. 1 Crore - Adjudicating Authority obligated to admit the petition once debt and default are proved.
Statutory provision(s):
- Insolvency and Bankruptcy Code, 2016 - Section 7
- Limitation Act, 1963 - Section 18
- Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 13(2)
- Arbitration and Conciliation Act, 1996 - Section 9
This judgment not only highlights the procedural aspects involved in initiating insolvency proceedings but also sets a precedent for cases where arbitration proceedings are pending, reiterating the supremacy of the IBC process in addressing corporate insolvency.
