2019 (7) TMI 1558 - Tri - Insolvency and Bankruptcy

Corporate insolvency proceedings initiated under Insolvency & Bankruptcy Code

The petition under section 7 of the Insolvency & Bankruptcy Code was admitted, initiating corporate insolvency resolution proceedings against the ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of debt - Existence of dispute - time limitation - HELD THAT:- As per section 7 of the I& B Code, 2016, the contention of the Respondent that the debt is disputed is not maintainable as the existence of a dispute is of no consequence in a petition filed under section 7. As the debt and default are established, the question that arises at this point is whether the Petition is filed with the period of limitation - It is imperative to mention here that unless the Petition is filed within the period of limitation, the same cannot be considered on merits. The position of law is well established that the right to apply to section 7 of the I & B Code, 2016 accrues on or after 01.12.2016, the present Petition is filed well within the limitation and deserves to be admitted - the right to apply under the Insolvency and Bankruptcy Code, 2016 has accrued to the Petitioner only on the date of commencement of the Code, i.e., on 01.12.2016. The Petition is filed on 18.07.2018 and therefore is well within the limitation period. The Application under sub-section (2) of Section 7 of I&B Code, 2016 is complete. The existing financial debt of more than rupees one lakh against the corporate debtor and its default is also proved. Accordingly, the petition filed under section 7 of the Insolvency and Bankruptcy Code for initiation of corporate insolvency resolution process against the corporate debtor deserves to be admitted. Application admitted - Moratorium declared. Issues Involved:1. Claim of financial debt and default.2. Acknowledgement of debt in balance sheets.3. Dispute regarding the debt and its payment.4. Applicability of the Limitation Act, 1963.5. Appointment of Interim Resolution Professional (IRP).Issue-wise Detailed Analysis:1. Claim of Financial Debt and Default:The petition was filed by A.K Corporation, a sole proprietorship concern, under section 7 of the Insolvency & Bankruptcy Code, 2016 (I&B Code) against Anupam Extractions Limited, the Corporate Debtor, for initiating Corporate Insolvency Resolution Process (CIRP). The petitioner claimed a total default of Rs. 74,33,697.94 as on 31.03.2018, which includes a principal amount of Rs. 26,80,666 and an interest of Rs. 47,53,031.94 compounded at 12% per annum. The loan was granted and disbursed from 24.05.2006 to 31.03.2007.2. Acknowledgement of Debt in Balance Sheets:The petitioner provided evidence that the loan amount was reflected in the audited balance sheets of the respondent from 2008 to 2018, categorizing it under 'Unsecured Loan from Director' and later under 'Unsecured loans from Shareholders.' According to established law, an entry in the balance sheet acknowledging a loan is considered an acknowledgment under section 18 of the Limitation Act, 1963.3. Dispute Regarding the Debt and Its Payment:The respondent admitted the debt but claimed it was withheld due to alleged malpractices and embezzlement of funds by the petitioner during his tenure as a director. However, the Supreme Court in M/s Innoventive Industries Limited v. ICICI Bank & Anr held that the adjudicating authority only needs to verify the occurrence of a default, and the existence of a dispute is irrelevant in a petition filed under section 7 of the I&B Code.4. Applicability of the Limitation Act, 1963:The respondent argued that the petition was barred by limitation, citing the Supreme Court decision in 'B. K Educational Services Private Limited v. Parag Gupta and Associates.' However, the tribunal noted that the right to file an application under section 7 of the I&B Code accrues on or after 01.12.2016, the date of the Code's commencement. Given this, the petition filed on 18.07.2018 was within the limitation period.5. Appointment of Interim Resolution Professional (IRP):The petitioner proposed Mr. Charudutt Marathe as the IRP, who confirmed that no disciplinary proceedings were pending against him. The tribunal found the application complete under sub-section (2) of Section 7 of the I&B Code, with the financial debt and default established, and thus admitted the petition.Order:The petition under section 7 of the I&B Code was admitted, initiating the corporate insolvency resolution process against the corporate debtor. A moratorium under section 14 of the I&B Code was declared, prohibiting the institution or continuation of suits against the corporate debtor, transferring or disposing of assets, and recovering property. The supply of essential goods or services to the corporate debtor was to continue uninterrupted. The public announcement of the CIRP was to be made immediately, and Mr. Charudutt Marathe was appointed as the IRP. The registry was directed to communicate the order to the relevant parties immediately.