2019 (6) TMI 1463 - Tri - Insolvency and Bankruptcy

Tribunal Declares Moratorium, Appoints IRP for Corporate Insolvency Resolution Process

The Tribunal admitted the petition, declared a moratorium, and appointed an Interim Resolution Professional (IRP) to initiate the Corporate Insolvency ... Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process and moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Acknowledgement of debt and extension of limitation under Section 18 of the Limitation Act, 1963 - Authority of an agent/authorised officer to institute insolvency proceedings on behalf of a financial creditor - Appointment of Interim Resolution ProfessionalAcknowledgement of debt and extension of limitation under Section 18 of the Limitation Act, 1963 - The petition is not barred by limitation as the corporate debtor furnished written acknowledgements of debt which extended the limitation period. - HELD THAT: - The Adjudicating Authority examined the revival/acknowledgement letters (Annexures 112 and 113) dated 22.03.2017 and 01.04.2018 respectively and found them to be unambiguous admissions of liability by the corporate debtor. On that basis the bench held that the acknowledgements operated to save/extend the period of limitation and therefore the petition filed under Section 7 was within time. [Paras 8]Limitation objection repelled; petition held within limitation in view of the acknowledgements of debt.Authority of an agent/authorised officer to institute insolvency proceedings on behalf of a financial creditor - The petition was filed with valid authority by an authorised officer of the financial creditor. - HELD THAT: - The petition was instituted by N. Venkateswaran, Deputy Manager of the financial creditor. The bench took on record the authorization letter filed by the petitioner and recorded that the competent authority had empowered Mr. N. Venkateswaran to file the application. Consequently the objection that the petition was filed without valid authority was rejected. [Paras 9]Objection regarding want of authority overruled; petition held to have been filed by an authorised representative.Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process and moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional - The petition under Section 7 was admitted, triggering CIRP; moratorium was declared and an Interim Resolution Professional was appointed. - HELD THAT: - Having found that the financial creditor had proved the debtor-creditor relationship, that the corporate debtor had admitted the debt and the petition was within limitation and filed with proper authority, the Adjudicating Authority concluded that the statutory requirements for admission under Section 7 were satisfied. The bench therefore admitted the petition, declared the moratorium in terms of Section 14 (with effect from 03.06.2019 until completion of CIRP or earlier order), directed publication of the public announcement under Section 13, and appointed the named Interim Resolution Professional to carry out functions under the Code. [Paras 12, 13]Petition admitted under Section 7; moratorium imposed; public announcement directed; Interim Resolution Professional appointed.Final Conclusion: The Tribunal admitted the Section 7 petition filed by the financial creditor against the corporate debtor, held the petition time barred objection and the objection as to authority to be without merit, declared moratorium effective from 03.06.2019, directed public announcement of CIRP and appointed the Interim Resolution Professional. Issues Involved:1. Limitation Period2. Valid Authority to File Petition3. Acknowledgment of Debt4. Compliance with Corporate Debt Restructuring (CDR) Scheme5. Grounds for Default6. Admission of Petition and Initiation of Corporate Insolvency Resolution Process (CIRP)Issue-Wise Detailed Analysis:1. Limitation Period:The Corporate Debtor argued that the petition is barred by limitation, referencing the decision in BK Educational Services Private Limited Vs. Parag Gupta and Associates, which held that a creditor cannot rely on the Insolvency and Bankruptcy Code (IBC) to recover time-barred debts. However, the Financial Creditor countered this by presenting Revival Letters dated 22nd March 2017 and 1st April 2018, acknowledging the debt. The Tribunal found that these acknowledgments extended the limitation period under Section 18 of the Limitation Act, 1963, thus making the petition timely.2. Valid Authority to File Petition:The Corporate Debtor contended that the petition was filed without valid authority. The Financial Creditor submitted an authorization letter showing that Mr. N. Venkateswaran, Deputy Manager of IDBI Bank Limited, was authorized to file the petition. The Tribunal reviewed and accepted this authorization, confirming the petition was filed with valid authority.3. Acknowledgment of Debt:The Corporate Debtor had acknowledged the debt in writing on two occasions: 22nd March 2017 and 1st April 2018. These acknowledgments were crucial as they extended the limitation period and confirmed the debt's existence. The Tribunal noted that these acknowledgments were clear and unambiguous, supporting the Financial Creditor's claim.4. Compliance with Corporate Debt Restructuring (CDR) Scheme:The Corporate Debtor argued that the Financial Creditor did not implement the CDR scheme in true letter and spirit, which led to financial difficulties. However, the Tribunal found that the Corporate Debtor failed to comply with essential terms and conditions of the CDR package, resulting in the classification of their loan accounts as Non-Performing Assets (NPA) on 30th September 2015.5. Grounds for Default:The Corporate Debtor cited various uncontrollable factors for their default, including non-availability of iron ore, unrest due to Telangana Agitation, power supply interruptions, raw material price fluctuations, and downturn in the infrastructure sector. The Financial Creditor contended that these factors did not absolve the Corporate Debtor of their repayment obligations. The Tribunal noted that despite these reasons, the Corporate Debtor had acknowledged the debt and defaulted on the loans.6. Admission of Petition and Initiation of Corporate Insolvency Resolution Process (CIRP):The Tribunal concluded that the Financial Creditor had fulfilled all requirements under the IBC. The petition was in order, and there were no valid objections against its admission. Consequently, the Tribunal admitted the petition under Section 7 of the IBC, 2016, and initiated the CIRP. A moratorium was declared, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovering property from the Corporate Debtor. The Tribunal appointed Mr. Dr. M.S. Sankar as the Interim Resolution Professional (IRP) to carry out the functions under the Insolvency & Bankruptcy Code.Order:The Tribunal admitted the petition, declared a moratorium, and appointed an IRP. The moratorium will be in effect from 3rd June 2019 until the completion of the CIRP or until the Tribunal approves a resolution plan or orders liquidation, whichever is earlier. Public announcement of the CIRP was to be made immediately as specified under Section 13 of the Code.