2019 (4) TMI 1999 - Tri - Insolvency and Bankruptcy

Tribunal Imposes Moratorium on Corporate Debtor

M/s. Andhra Bank Versus M/s. Leo Meridian Infrastructure Projects and Hotels Limited,

The Tribunal admitted the petition under Section 7 of IBC, 2016, declared a moratorium, and appointed an Interim Resolution Professional. The moratorium ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The IBC shall have effect not withstanding anything in consistent therewith contained in any other law for the time being in force including DRT Act, 1993; SARFAESI Act, 2002, money suit etc. The petition therefore filed by the Financial Creditor cannot be rejected on the two grounds raised by the Corporate Debtor. Before admitting the Petition filed under Section 7 of IBC, the Tribunal has to see whether there is a debt due and if it is in default. Honble Apex Court held in 'Innovative Industries Ltd Vs. ICICI Bank and Ors [2017 (9) TMI 58 - SUPREME COURT] that 'The moment the Adjudicating Authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the Applicant to rectify the defect within 7 days of receipt of notice from the Adjudicating Authority'. The Corporate Debtor admits default. The petition is complete and therefore deserves to be admitted. Petition admitted - moratorium declared. Issues Involved:1. Default in repayment by Corporate Debtor.2. Timeliness of the petition under the Limitation Act.3. Pendency of proceedings before the Debts Recovery Tribunal (DRT).4. Acknowledgement of debt in the balance sheet.5. Maintainability of the petition under Section 7 of IBC.Detailed Analysis:1. Default in Repayment by Corporate Debtor:The petition was filed by the Financial Creditor, Andhra Bank, against the Corporate Debtor for defaulting in repaying a sum of Rs. 339,05,12,985.44. The Corporate Debtor, a Public Limited Company engaged in the business of hotels and resorts, had availed various credit limits from the Financial Creditor. The Financial Creditor sanctioned multiple secured overdraft loans, term loans, and other credit facilities to the Corporate Debtor over several years, which were not repaid, leading to the default.2. Timeliness of the Petition under the Limitation Act:The Corporate Debtor contended that the claims of the Financial Creditor were time-barred under the Limitation Act, as the loans were sanctioned in 2008 and 2009, and the petition was filed in 2018. However, the Financial Creditor argued that the debt was acknowledged in the Corporate Debtor's balance sheet and part payments were made, which extended the limitation period. The Tribunal held that the acknowledgment of debt in the balance sheet amounts to acknowledgment under Section 19 of the Limitation Act, thus the petition was within the limitation period.3. Pendency of Proceedings before the Debts Recovery Tribunal (DRT):The Corporate Debtor argued that since proceedings were already initiated before the DRT, the present petition under Section 7 of IBC was not maintainable. The Financial Creditor had initiated proceedings before the DRT for recovery of dues, and the matter was still pending. However, the Tribunal held that the pendency of proceedings before the DRT does not bar the filing of a petition under Section 7 of IBC, as per the decision of the Hon'ble NCLAT in M/S Unigreen Global Private Limited Vs Punjab National Bank & ors.4. Acknowledgement of Debt in the Balance Sheet:The Tribunal noted that the Corporate Debtor had acknowledged the debt due to the Financial Creditor in its audited balance sheets for every financial year. The acknowledgment of liability in the balance sheet amounts to acknowledgment of debt, thus extending the limitation period. This was supported by the decision of the NCLT Mumbai Bench in TJSB Sahakari Bank Ltd Vs. M/S Unimetal Castings Ltd.5. Maintainability of the Petition under Section 7 of IBC:The Tribunal examined whether there was a debt due and if it was in default. The Corporate Debtor admitted the default and the debt due to the Financial Creditor. The Tribunal referred to the decision of the Hon'ble Apex Court in Innovative Industries Ltd Vs. ICICI Bank and Ors, which stated that if the Adjudicating Authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete. The petition was found to be complete, and the Corporate Debtor's admission of default led to the admission of the petition.Judgment:The Tribunal admitted the petition under Section 7 of IBC, 2016, declared a moratorium as per Section 14 of the Code, and appointed an Interim Resolution Professional (IRP). The moratorium prohibits the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of its assets, and recovering property occupied by the Corporate Debtor. The order of moratorium will be effective until the completion of the Corporate Insolvency Resolution Process or until the Tribunal approves the Resolution Plan or passes an order for liquidation, whichever is earlier.