2019 (12) TMI 1139 - Tri - Insolvency and Bankruptcy

Application to Initiate CIRP Rejected: Lack of Evidence & Barred by Limitation

The tribunal rejected the application to initiate Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC against the Corporate Debtor. ... Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment - Default of debt - necessary records not produced by petitioner in support of his claim - time limitation - HELD THAT:- In column No.2 of Part IV, the applicant mentioned the date of default is on 31.07.2019 and the amount on which the applicant claimed as per the date of default is of ₹ 27,23,125.00/-. Part V, which relates to the particular of financial debt (Documents, Records and Evidence of Default) from serial No.l to 7, the applicant mentioned this fact that 'Not Applicable' and at serial No.8, which relates to the list of other documents, he mentioned that 'The Ledger account issued by the corporate debtor and the copy of bank passbook of the applicant showing the interest paid by the corporate debtor'. Whether the case of the applicant comes under the financial debt and the applicant is the financial creditor or not? - HELD THAT:- tt is very difficult to ascertain the amount, which has been shown in the ledger account in financial year 01.04.2018 to 28.02.2019, is in lieu of amount advanced by the applicant to the corporate debtor on 04.11.2010, 19.11.2010, 15.02.2011 and 08.11.2012. This document is also not sufficient to establish that the interest was paid prior to that period. Since, there is no other document to establish that on the amount shown in column 1 part IV, the interest was regularly being paid to the applicant by the corporate debtor, I am unable to place reliance upon this document. Time Limitation - HELD THAT:- The applicant has not produced any document, (same as referred in part V), therefore, it is admitted fact that the said debt of the applicant has not been acknowledged and so far as the document, which the applicant claimed, that the last interest has been paid in the financial year 2018-19, is the date of default is concerned, in my opinion, it is not liable to be accepted because there is no such agreement on the record to show that, when the applicant was entered into an agreement to the Corporate Debtor for providing financial assistance and what was the due date for repayment of the said amount in the absence of any specific period within which the amount is required to be refunded and in the absence of any acknowledgement of the debt after the expiry of three years, in my opinion, debt is barred by limitations. This Adjudicating Authority is of the considered view, that the present claim of the applicant in the absence of acknowledgement of debt is barred by Article 137 of Limitation Act - the present petition filed u/s 7 is not according to the provision of law and is not complete and it is also barred by limitation, thus this petition is not liable to be admitted. Petition dismissed. Issues Involved:1. Establishment of Financial Debt2. Default in Payment by Corporate Debtor3. Admissibility of Documents as Evidence4. Limitation Period for Filing the ApplicationDetailed Analysis:1. Establishment of Financial Debt:The applicant claimed to have advanced a financial facility totaling Rs. 25,00,000 to the Corporate Debtor during 2010-12, with an initial interest rate of 6% per annum, later increased to 9% per annum by mutual agreement. However, the tribunal found that the applicant failed to produce any record of default with the information utility or any complete financial contract reflecting all amendments and waivers. The applicant's passbook, which was meant to show payments from the Corporate Debtor, was not authenticated by the concerned bank and thus deemed inadmissible under the Banking Evidence Act. Consequently, the tribunal concluded that the applicant failed to establish the claimed amount as a financial debt.2. Default in Payment by Corporate Debtor:The applicant alleged that the Corporate Debtor defaulted on interest payments post-October 2018, despite several notices and reminders. The tribunal noted that the applicant did not provide sufficient documentation to support the claim of continuous interest payments or defaults. Specifically, the ledger account provided only covered the period from 01.04.2018 to 28.02.2019 and did not conclusively link the interest payments to the amounts advanced in 2010-12. Therefore, the tribunal could not ascertain the default in payment.3. Admissibility of Documents as Evidence:The tribunal scrutinized the documents submitted by the applicant, including the bank passbook and ledger account, and found them lacking in authenticity and completeness. The bank passbook did not bear the necessary signatures, and the ledger account did not cover the entire period relevant to the claimed debt. The tribunal emphasized the need for authenticated documents and complete financial contracts to establish a claim under Section 7 of the Insolvency and Bankruptcy Code (IBC).4. Limitation Period for Filing the Application:The tribunal referred to Article 137 of the Limitation Act, which mandates that an application for debt recovery must be filed within three years from the date the right to sue accrues. The applicant's last payment was made on 08.11.2012, but the application was filed much later without any acknowledgment of debt by the Corporate Debtor. The tribunal cited the Supreme Court's decision in B.K. Educational Services (P.) Ltd. v. Parag Gupta & Associates, which clarified that applications under Sections 7 and 9 of the IBC are subject to the Limitation Act. Consequently, the tribunal ruled that the claim was barred by limitation.Conclusion:The tribunal concluded that the applicant failed to establish the existence of a financial debt, default in payment, and did not provide admissible evidence. Additionally, the claim was barred by the limitation period. Therefore, the application to initiate Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC against the Corporate Debtor was rejected, and the petition was dismissed.