2017 (8) TMI 1143 - Tri - Insolvency and Bankruptcy

Corporate Debtor Default Leads to Insolvency Proceedings | Moratorium Declared

Ajitnath Steels Pvt. Ltd. Versus Ellora Paper Mills Limited, Nagpur

The Tribunal found that the Corporate Debtor defaulted in repaying the loan and admitted the application under Section 7 of the Insolvency and Bankruptcy ... Initiating Insolvency Resolution Process against the Corporate Debtor - Held that:- Corporate Debtor defaulted in repaying the loan availed and also placed the name of the Insolvency Resolution Professional to act as Interim Resolution Professional, having this Bench noticed that default has occurred and there is no disciplinary proceedings pending against the proposed resolution professional, therefore the Application under sub-section (2) of section 7 is taken as complete, accordingly this Bench hereby admits this Application declaring Moratorium with the directions as mentioned herewith. Issues Involved:1. Barred by the law of limitation.2. Suppression of material facts.3. Classification as Financial Creditor.4. Non-compliance with procedural requirements under the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.Issue-wise Detailed Analysis:1. Barred by the Law of Limitation:The Respondent contended that the application is time-barred as the loan was repayable on 11.03.2011, and the application was filed on 19.04.2017, exceeding the limitation period. The Petitioner argued that the limitation period starts from the date of demand, which was made on 29.09.2016, and the application was filed within the permissible period. The Tribunal accepted the Petitioner's argument, citing that an acknowledgment of debt in the balance sheet extends the limitation period under Section 18 of the Limitation Act, 1963. The Tribunal held that the petition is filed within the limitation period.2. Suppression of Material Facts:The Respondent claimed that the loan was part of an arrangement for the Abhijeet Group to acquire the Respondent's company and not a loan to be repaid. The Tribunal found no documentary evidence supporting the claim of acquisition and held that the loan agreement is a sovereign document, making the Respondent liable for repayment. The Tribunal dismissed the contention of suppression of material facts as immaterial.3. Classification as Financial Creditor:The Respondent argued that the loan was an investment for acquiring the corporate debtor and not a financial debt. The Tribunal rejected this argument, stating that the loan agreement and pledge of shares as security indicate a financial debt, and thus, the Petitioner qualifies as a Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016.4. Non-compliance with Procedural Requirements:The Respondent contended that the application was not in accordance with the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, as it did not include a certificate from a banker under Section 2A of the Bankers' Books Evidence Act, 1891. The Tribunal noted that the Code does not mandate such a certificate and that the Petitioner had substantially complied with the provisions by filing the loan agreement, statements of account, and balance sheets. The Tribunal also acknowledged a certificate from Canara Bank confirming the loan disbursement. Therefore, this objection was deemed unsustainable.Conclusion:The Tribunal found that the Corporate Debtor defaulted in repaying the loan and admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. A moratorium was declared, prohibiting the institution or continuation of suits against the corporate debtor, and Mr. Mohan Ram Goenka was appointed as the Interim Resolution Professional (IRP). The public announcement of the corporate insolvency resolution process was ordered to be made immediately. The petition was thus admitted, and the Registry was directed to communicate the order to both parties.