Petitioner: Punjab National Bank (International) Ltd. (Represented by Mr.Mithilesh Pandey of Supreme Law House LLP)
Respondent: La Trends Fabrica Pvt. Ltd.
National Company Law Tribunal, Mumbai Bench, Court IV
Company Petition (IB)/271(MB)2022
Case Overview:
The case before the National Company Law Tribunal, Mumbai Bench, involved a financial dispute between Punjab National Bank (International) Ltd. (the Petitioner) and La Trends Fabrica Pvt. Ltd. (the Respondent). The Petitioner sought the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Respondent due to defaulted loan repayment.
Facts of the Case:
The Petitioner provided a loan facility of US$ 4.67 million to the Respondent for working capital, secured by various guarantees, securities, and mortgages. Despite this, the Respondent defaulted on loan repayment, prompting the issuance of a Loan Recall Notice. The Respondent initially resumed payments but ceased abruptly, leading the Petitioner to petition for admission, moratorium, and commencement of CIRP.
Issues Involved:
Key issues included the validity of the debt as a Financial Debt under Section 5(8)(h) of the Insolvency & Bankruptcy Code, 2016 (IBC), reasons for default, and the liability of the Respondent as a Non-Performing Asset.
Defence of the Corporate Debtor:
The Respondent challenged the initiation of CIRP, arguing that specific requirements had to be fulfilled by the Petitioner, including proving willful default and adherence to prescribed formats. They asserted that the repayment responsibility was deferred due to a moratorium granted for a new business venture. Additionally, they attributed their inability to repay to the adverse effects of COVID-19 and expressed willingness to engage in a One Time Settlement (OTS).
Findings of the Case:
The learned Tribunal found merit in the Petitioner's petition, substantiated by evidence of the debt exceeding the stipulated threshold under the IBC. Despite the Respondent's admission of the debt and proposal for OTS, the petition was admitted, and a moratorium was declared under Section 14 of the IBC. Accordingly, an IRP was appointed.
Legal Analysis:
1. Validity of Debt: The learned Tribunal applied the provisions of the IBC to determine the validity of the debt. The debt qualified as a Financial Debt under Section 5(8)(h) of the IBC, as it arose from a loan provided by the Petitioner.
2. Default of Payment: The learned Tribunal considered the evidence presented regarding the default of payment by the Respondent. Despite acknowledging the debt, the Respondent failed to fulfill its repayment obligations, leading to the initiation of CIRP.
3. Liability of Corporate Debtor: The learned Tribunal established the liability of the Respondent as a Non-Performing Asset and admitted the petition for CIRP. The moratorium declared under Section 14 of the IBC ensured protection from legal actions against the Respondent during the resolution process.