Tribunal grants petition under Insolvency & Bankruptcy Code, appoints Resolution Professional

The Tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, declaring a moratorium under Section 14 of the Code. An Interim Resolution Professional was appointed to carry out the functions under the Code, with directions to mark appropriate remarks against the Corporate Debtor on the Ministry of Corporate Affairs website. The petition was upheld despite arguments on limitation and the validity of the petition under an RBI Circular, based on the acknowledgment of debt and default by the Corporate Debtor.

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Issues Involved:
1. Default in repayment of financial debt by the Corporate Debtor.
2. Barred by limitation.
3. Validity of the petition under RBI Circular dated 12.02.2018.
4. Existence of debt and default.

Issue-wise Detailed Analysis:

1. Default in repayment of financial debt by the Corporate Debtor:
The petitioner, State Bank of India (SBI), filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor for defaulting on a financial debt of Rs. 222 crores as of 31.07.2019. The Corporate Debtor had availed various financial facilities from SBI and its merged associate banks, including State Bank of Hyderabad, State Bank of Mysore, State Bank of Travancore, State Bank of Bikaner & Jaipur, and State Bank of Patiala. The accounts of these banks were transferred and merged with SBI, allowing SBI to pursue recovery proceedings.

2. Barred by limitation:
The Corporate Debtor contended that the petition was barred by limitation, arguing that the date of default should be the date of Non-Performing Asset (NPA) classification during 2012/2013, making the three-year limitation period expire by 2015/2016. They relied on a Demand Notice dated 16.08.2013 issued by Union Bank of India under SARFAESI Act, asserting that the petition filed on 06.09.2019 was time-barred under Section 137 of the Limitation Act. However, the Tribunal noted that the Corporate Debtor had acknowledged the debt and requested a One Time Settlement (OTS) in a letter dated 29.01.2020, thereby extending the limitation period.

3. Validity of the petition under RBI Circular dated 12.02.2018:
The Corporate Debtor argued that the petition was initiated based on an RBI Circular dated 12.02.2018, which the Supreme Court later declared ultra vires of Section 35AA of the Banking Regulation Act. Despite this argument, the Tribunal focused on the existence of debt and default, noting that the Corporate Debtor had acknowledged the debt and sought an OTS, indicating an ongoing obligation to repay.

4. Existence of debt and default:
The Tribunal observed that the Corporate Debtor had availed financial facilities and defaulted on repayment. The Debt Recovery Tribunal (DRT) had issued three Recovery Certificates in favor of SBI and its associate banks, confirming the debt and default. The Corporate Debtor's acknowledgment of debt in the letter dated 29.01.2020 further substantiated the existence of financial debt and default.

Judgment:
The Tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, declaring a moratorium under Section 14 of the Code. The moratorium prohibits the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of its assets, and recovery actions. The Tribunal appointed Shri G. Satyanarayana Murty as the Interim Resolution Professional (IRP) to carry out the functions under the Insolvency & Bankruptcy Code. The Registry was directed to send a copy of the order to the Registrar of Companies, Hyderabad, for marking appropriate remarks against the Corporate Debtor on the Ministry of Corporate Affairs website. The petition was accordingly admitted.

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