2021 (11) TMI 1028 - Tri - Insolvency and Bankruptcy

Tribunal Initiates CIRP with Moratorium Imposed

Asset Reconstruction Company (India) Ltd. Versus Uday Estates Pvt. Ltd.

The tribunal found that the application was complete and admissible, with a valid acknowledgment of debt by the Corporate Debtor, extending the limitation ... 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 application is complete and the term loan facility has been availed by the Corporate Debtor and the same has not been repaid by the Corporate Debtor, therefore there is default in payment of debt. That there is a valid Assignment of Debt and before the expiry of limitation period to initiate proceedings, there is a payment of ₹ 15 crore pursuant to the order of DRT and order of DRT is placed on record. Aggrieved by the order of DRT, Corporate Debtor went in Writ Petition before the Hon'ble High Court, Delhi. Hon'ble High Court's judgement is also placed on record - There is a valid acknowledgement on the part of the Corporate Debtor in the form of Settlement Proposal and there is settled law as declared by Hon'ble NCLAT in the matter of Manesh Agarwal Vs Bank of India and Anr. [2020 (8) TMI 697 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] where it was held that Article 137 of the Limitation Act shall be applicable for an Application filed under Sections 7, 9 or 10 of the I&B Code. Since the account of the Corporate Debtor was classified as NPA on 29th January 2013. Therefore, default started on 29th January 2013 and three years period of limitation was available for applying u/s Section 7 of the Code - thus, a fresh period of limitation of three years started w.e.f. 01st June 2016 in terms of Section 18 of the Limitation Act. Thus it is clear that the petition filed under Section 7 of the Code on 29th September 2018 is well within limitation. The term 'Without prejudice to the rights and contentions of the Corporate Debtor' does not negates the admission of the liability of the debt. Acknowledgement of liability under Section 18 of the Limitation Act, 1963 itself demands a broader interpretation to serve the ends of justice - it is opined that OTS shall constitute a valid acknowledgement under Section 18 of the Limitation Act, 1963. Petition admitted - moratorium declared. Issues Involved:1. Whether the application filed by the Financial Creditor is barred by limitation.2. Whether there is a valid acknowledgment of debt by the Corporate Debtor.3. Whether the application for initiating Corporate Insolvency Resolution Process (CIRP) is complete and admissible.Issue-wise Detailed Analysis:1. Limitation Period:The Corporate Debtor argued that the application by the Financial Creditor is barred by time, asserting that the account was classified as a Non-Performing Asset (NPA) on 31.12.2011, and thus the limitation period expired on 30.12.2014. However, the Corporate Debtor made payments totaling Rs. 15 crore from 06.03.2014 to 13.08.2014, extending the limitation period to 12.08.2017. The Corporate Debtor contended that these payments were made pursuant to the order of the Debt Recovery Tribunal (DRT) and should not be considered as acknowledgment under Section 18 of the Limitation Act, 1963.2. Acknowledgment of Debt:The Financial Creditor argued that the Corporate Debtor acknowledged the debt through various documents, including the balance sheet for the financial year 2012-2013, the judgment of the DRT dated 29.04.2016, and the High Court judgment dated 11.07.2018. The Financial Creditor also cited the Corporate Debtor's settlement proposals dated 03.07.2018 and 11.08.2018 as acknowledgments of liability. The Corporate Debtor countered that these documents do not constitute valid acknowledgment as they were either made 'without prejudice' or were not accepted by the Financial Creditor.3. Completeness and Admissibility of Application:The tribunal found that the application was complete and that the Corporate Debtor had availed the term loan facilities but failed to repay, resulting in a default. The tribunal noted that the debt was validly assigned to the Financial Creditor and that the Corporate Debtor's payments pursuant to the DRT order and subsequent legal proceedings extended the limitation period. The tribunal also recognized the settlement proposals as valid acknowledgments of debt under Section 18 of the Limitation Act, 1963.Judgment:The tribunal concluded that there was a valid acknowledgment of debt by the Corporate Debtor, and the application was not barred by limitation. The tribunal admitted the petition and initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. A moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, was imposed, prohibiting various actions against the Corporate Debtor, including the institution or continuation of suits, transferring or encumbering assets, and recovering property.The tribunal appointed Mr. Nilesh Sharma as the Interim Resolution Professional (IRP) and directed the Financial Creditor to deposit Rs. 2 lakh to meet the immediate expenses of the IRP. The tribunal ordered that the IRP take necessary steps as mandated under the Code and file a report before the Adjudicating Authority. Copies of the order were directed to be sent to both parties and the IRP for further consideration.