2019 (5) TMI 986 - Tri - Insolvency and Bankruptcy

Tribunal upholds insolvency petition by ARCIL, declares moratorium, appoints IRP for Corporate Debtor.

The Tribunal admitted the insolvency petition filed by ARCIL, ruling in favor of the validity of debt assignment, proper authorization of the petition, ... Corporate insolvency process - outstanding debt - Acquisition of financial assets related to corporate debtor by Standard Chartered Bank is defective, illegal and bad in law - application under the IBC 2016 deserves to be rejected on ground and the alleged claims of financial creditor are based on aforesaid deed of assignment which assigns the defective and illegal rights - prescribed procedure under Section 7(5) of the IB Code HELD THAT:- we do not find substance in the objection of the Corporate-Debtor with regard to the assignment of debt by the State Bank of India to the Standard Chartered Bank and further to the present Financial-Creditor. We are of the view that even assuming so that the Standard Chartered Bank was not registered under the SARFAESI Act nor having license to business of ARCs in India being registered with the RBI, there can be no bar for assignment and transfer of the debt by the Principle Lender to another bank or to a financial institution for enforcing/recovery of such debt as per the above decision of the Hon’ble Supreme Court, that a debt is an asset in the hand of the bank/lender and NPAs are accounts receivable are treated as NPA. A Bank can always transfer its assets and such transfer (of its debts) and it no manner affect the right or interest of the borrowers. There is no prohibition in the Bank Regulation Act to the bank transferring its assets inter-se nor it can be said the bank are trading in debts. Therefore, such objection of the Respondents in respect of maintainability of the present petition are not legally sustainable; hence is rejected. Procedure under Section 7(5) of the IB Code - The objections raised by the Corporate-Debtor are not legally sustainable in the eyes of Law, as we found that the Corporate Debtor is taking contradictory stands which amount approbate and reprobate on some facts and conditions which not permissible in the eye of the Law. It is also found that clarification as sought for by this Bench by its order dated 19.11.2018 is properly answered and stands satisfied through affidavit of Mr. Nishith Doshi annexing with letter of authority of December, 2018 and other documents. Therefore, it is established that the Corporate Debtor has admitted the amount of debt due to the present applicant to the extent of ₹ 16.5 Crores and further issued cheque for amount of ₹ 2.65 Crores; which are defaulted as such amount is more than rupees one lakh; hence, the present IB. Petition deserves to for admission. Present petition is found complete for the purpose of its admission. Issues Involved:1. Validity of Debt Assignment2. Admissibility of the Insolvency Petition3. Authorization of the Signatory4. Calculation of Debt Amount5. Allegations of Suppression and Concealment6. Appointment of Interim Resolution Professional (IRP)Issue-wise Detailed Analysis:1. Validity of Debt Assignment:The Corporate Debtor challenged the validity of the debt assignment from State Bank of India (SBI) to Standard Chartered Bank (SCB) and subsequently to Asset Reconstruction Company (India) Limited (ARCIL), arguing that SCB was not registered as an Asset Reconstruction Company (ARC) under the SARFAESI Act at the time of assignment. The Tribunal referred to the Supreme Court's decision in ICICI Bank Ltd. v. Official Liquidator of APS Star Industries, which held that debts are assets in the hands of the lender and can be assigned to another bank. The Tribunal concluded that the assignment was valid and legally enforceable, even if SCB was not registered under SARFAESI, as the Banking Regulation Act permits such inter-se assignments between banks.2. Admissibility of the Insolvency Petition:The Corporate Debtor admitted to defaulting on the debt and issued cheques for Rs. 2.65 crores, which were dishonored. The Tribunal noted that the default amount exceeded Rs. 1 lakh, the threshold for triggering the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code (IBC). The Tribunal found that the debt was admitted, and the default was established, thus making the petition maintainable.3. Authorization of the Signatory:The Corporate Debtor argued that the person signing the insolvency petition was not properly authorized. The Tribunal issued a notice under Section 7(5) of the IBC, seeking clarification. ARCIL provided an affidavit from Mr. Nishith Doshi, along with a letter of authority and Board Resolution, confirming the authorization of the signatory. The Tribunal was satisfied with the clarification and found that the petition was properly authorized.4. Calculation of Debt Amount:The Corporate Debtor raised concerns about discrepancies in the debt amount claimed by ARCIL. The Tribunal noted the mismatch in figures but referred to the NCLAT decision in Starlog Enterprises Ltd. v. ICICI Bank Limited, which held that such discrepancies do not invalidate the petition if the default amount exceeds Rs. 1 lakh. The Tribunal found that the debt amount was more than Rs. 1 lakh and the default was established, thus the petition was admissible.5. Allegations of Suppression and Concealment:The Corporate Debtor alleged that ARCIL suppressed material information and did not disclose a settlement letter. The Tribunal found that the Corporate Debtor had admitted the debt and issued cheques for settlement, which were dishonored. The Tribunal held that the Corporate Debtor could not approbate and reprobate by taking contradictory stands and that the objections were not legally sustainable.6. Appointment of Interim Resolution Professional (IRP):The Tribunal appointed Mr. Sudip Bhattacharya as the Interim Resolution Professional (IRP) and directed him to make a public announcement of the moratorium and follow the provisions of Sections 13 and 14 of the IBC. The IRP was tasked with acting as per the Tribunal's directions and the relevant provisions of the IBC.Conclusion:The Tribunal admitted the insolvency petition filed by ARCIL, finding that the debt assignment was valid, the petition was properly authorized, the default amount exceeded the threshold, and the objections raised by the Corporate Debtor were not legally sustainable. The Tribunal declared a moratorium and appointed an IRP to commence the CIRP for the Corporate Debtor.