Tribunal Upholds NPA Declaration in Insolvency Case

The Tribunal upheld the admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by 'Indiabulls Housing Finance Ltd.' against 'BHA Associates Private Limited.' The Adjudicating Authority declared the Corporate Debtor as a Non-performing Asset (NPA) based on default, emphasizing that once a debt becomes due and is not paid, the insolvency resolution process is triggered. The Tribunal dismissed the appeal challenging the NPA declaration, as it found the debt payable and default had occurred, citing the Supreme Court's decision in 'M/s. Innoventive Industries Ltd. Vs. ICICI Bank Ltd. - (2018) 1 SCC 407.'

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Issues:
Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 based on default and debt being more than Rupees One Lakh.

Analysis:
The case involved an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by 'Indiabulls Housing Finance Ltd.' against 'BHA Associates Private Limited' (Corporate Debtor). The Adjudicating Authority declared the Corporate Debtor as a Non-performing Asset (NPA), which was challenged based on an agreement. However, the Tribunal emphasized that under the I&B Code, once a debt becomes due and is not paid, the insolvency resolution process begins. The Hon'ble Supreme Court's decision in 'M/s. Innoventive Industries Ltd. Vs. ICICI Bank Ltd. - (2018) 1 SCC 407' was cited to explain the triggering of the Code upon default of a debt of Rupees One Lakh or more. The Code differentiates between debts owed to financial creditors and operational creditors, with specific provisions for each.

The Tribunal highlighted that under Section 7 of the I&B Code, a financial creditor can trigger the process by submitting an application accompanied by prescribed documents. The adjudicating authority must verify the default within 14 days of application receipt. If satisfied, the application is admitted unless incomplete. The Corporate Debtor can contest the default at this stage, asserting that the debt is not due in law or fact. However, in this case, the Tribunal found that the debt was payable, and default had occurred, leading to the dismissal of the appeal on merit.

The Appellant's counsel requested a remand to determine the debt's legality, but this was rejected as the Corporate Debtor did not claim the debt was not payable. Consequently, the Tribunal, while condoning a six-day appeal delay, dismissed the appeal on its merits.

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