Tribunal admits Corporate Debtor to CIRP under Section 7

The Tribunal ruled in favor of the Financial Creditor, admitting the Corporate Debtor into Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Tribunal considered the One Time Settlement (OTS) proposal as an acknowledgment of debt, extending the limitation period for filing. The appointed Interim Resolution Professional (IRP) was tasked with managing the CIRP, imposing a moratorium to protect the debtor's assets. The Financial Creditor was directed to pay the IRP's fees and expenses, and the application was allowed and disposed of accordingly.

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Issues Involved:
1. Timeliness of the application under Section 7 of IBC, 2016.
2. Validity of the One Time Settlement (OTS) proposal as an acknowledgment of debt under Section 18 of the Limitation Act, 1963.
3. Authorization of the person filing the application.
4. Appointment of the Interim Resolution Professional (IRP).
5. Implementation of the Corporate Insolvency Resolution Process (CIRP).

Detailed Analysis:

1. Timeliness of the Application:
The primary issue was whether the application filed by the Financial Creditor was within the limitation period. The Financial Creditor argued that although the application was filed marginally beyond three years from the date the account was classified as NPA, it was still within the limitation period due to the OTS proposal submitted by the Corporate Debtor, which acknowledged the debt. The Tribunal accepted this argument, referencing the Supreme Court decision in Dena Bank vs. C. Shivakumar Reddy, which held that an OTS proposal could be considered an acknowledgment under Section 18 of the Limitation Act, thus extending the limitation period.

2. Validity of the OTS Proposal as an Acknowledgment of Debt:
The Corporate Debtor contended that the OTS proposal was made "without prejudice" and explicitly stated that it did not amount to an acknowledgment of debt. However, the Tribunal found that the OTS proposal, which offered a specific amount as full and final settlement, constituted an acknowledgment of liability under Section 18 of the Limitation Act. The Tribunal noted that the "without prejudice" rule typically applies to actual disputes and negotiations, which was not the case here. The Tribunal cited several precedents, including ITC Limited vs. Blue Coast Hotels Limited, to support its decision that the OTS proposal extended the limitation period.

3. Authorization of the Person Filing the Application:
The Corporate Debtor challenged the validity of the application on the grounds that it was not filed by an authorized person. The Tribunal reviewed the documents and found that the Financial Creditor, being a scheduled bank, had a structured delegation of authority. The application was signed by an Assistant General Manager authorized by a General Manager, which met the requirements under the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Tribunal rejected the Corporate Debtor's plea, emphasizing the need for a pragmatic approach in economic laws to facilitate speedy recovery and protect public depositors.

4. Appointment of the Interim Resolution Professional (IRP):
The Tribunal noted that the name of the IRP was proposed, and his consent was on record. No material evidence was presented to show any disciplinary proceedings against the proposed IRP. Consequently, the Tribunal appointed the proposed IRP to oversee the CIRP.

5. Implementation of the Corporate Insolvency Resolution Process (CIRP):
The Tribunal admitted the application and ordered the initiation of the CIRP against the Corporate Debtor. The Tribunal imposed a moratorium under Section 14 of the IBC, prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor and protecting the debtor's assets. The IRP was directed to make a public announcement of the CIRP, call for claims, and perform duties as per Sections 17, 18, 20, and 21 of the IBC. The Financial Creditor was instructed to pay the IRP's fees and expenses until the Committee of Creditors (CoC) decided on further remuneration.

Order:
1. The Corporate Debtor was admitted into CIRP under Section 7 of IBC, 2016.
2. Mr. Ramchandra Dallaram Choudhary was appointed as the IRP.
3. A moratorium was imposed, effective from the date of the order.
4. The IRP was instructed to make a public announcement and call for claims.
5. The IRP was tasked with protecting the value of the Corporate Debtor's property and managing operations as a going concern.
6. The Financial Creditor was ordered to pay the IRP's fees and expenses.
7. The Registry was directed to communicate the order to all relevant parties and upload it on the website.

The application CP (IB) No. 59/7/NCLT/2019 was allowed and disposed of accordingly.

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