2020 (2) TMI 694 - Tri - Insolvency and Bankruptcy

Tribunal Admits Insolvency Application: Sec. 7, IBC 2016

The tribunal admitted the application under Sec. 7 of the Insolvency & Bankruptcy Code, 2016, filed by the financial creditor against the corporate ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - time limitation - HELD THAT:- A letter regarding strategic investor have been stated to have been written by such person on 1/10/2015 as well as on 8/6/2016 which has formed part of discussion and deliberation between the corporate debtor and financial creditor. The corporate debtor has also referred to a fact that it had paid ₹ 4.34 crore to SBI during the period from 25/8/2014 to 25/8/2015 under 'holding on operation' permitted by SBI in terms of the letter dated 25/8/2014. This fact is born out from the letter of demand, copy of the same has been placed at pages 138 to 149 of the reply affidavit of the corporate debtor. It has also been mentioned at para (v) at page 12 of the reply that the proposal of restructuring was given in the year 2016, which was rejected by the bank, copy of such rejection letter dated 1/10/2016 has also been placed on record. These factual aspects, if read with the last payment made then it can be safely concluded that limitation has not expired - in view of Explanation (a) to Sec. 18 of the Limitation Act, such actions constitute an acknowledgment of debt, which is before expiration of original period of limitation, therefore, the debt is not barred by limitation - there are no merits in the ground of the corporate debtor. Consent of all the members of consortium before filing petition under Sec. 7 of Insolvency & Bankruptcy Code, 2016 - HELD THAT:- No such condition exists either in Sec. 6 or 7 of the Insolvency & Bankruptcy Code, 2016. Thus, if condition of consent by all the members of consortium of lenders/joint lenders forum is considered mandatory for filing a petition under Sec. 7 of Insolvency & Bankruptcy Code, 2016 then it would amount to legislative action which is not in our domain. It would also be inconsistent with the scheme, object and specific provisions of Sec. 3(6) of Insolvency & Bankruptcy Code, 2016 which define the term 'claim' in the widest possible meaning - In the present case the financial creditor has filed application individually. Thus, we hold that consent of other members of the consortium is not required. Jurisdiction - power of authority of the person who has filed the petition - HELD THAT:- We have carefully perused the documents produced by the financial creditor and hold that such person has got the requisite authority to file this petition. Consequently, this ground of the corporate debtor is also rejected. Application is admitted - moratorium declared. Issues Involved:1. Limitation period for filing the application.2. Consent and authorization to file the application.3. Acknowledgment of debt and its impact on limitation.4. Authority of the person who filed the petition.5. Appointment of Interim Resolution Professional (IRP).Issue-wise Detailed Analysis:1. Limitation Period for Filing the Application:The application was filed under Sec. 7 of the Insolvency & Bankruptcy Code, 2016 by the financial creditor, State Bank of India, to initiate the corporate insolvency resolution process against the corporate debtor, Silverton Spinners Limited, for a default amount of Rs. 151,19,70,185.24. The corporate debtor argued that the application was barred by limitation, claiming the date of default was 15/1/2013 and the petition was filed in 2018. However, the tribunal noted that extensive correspondence and acknowledgments of debt by the corporate debtor, including letters dated 15/6/2016 and 20/4/2018, indicated ongoing acknowledgment of the debt, thus extending the limitation period. The tribunal concluded that the limitation had not expired, referencing Explanation (a) to Sec. 18 of the Limitation Act.2. Consent and Authorization to File the Application:The corporate debtor contended that the application was filed without the consent/authorization of the lead bank, as required by the inter se agreement among joint lenders. The tribunal, however, clarified that no such condition exists under Sec. 6 or 7 of the Insolvency & Bankruptcy Code, 2016. The tribunal emphasized that requiring consent from all consortium members would be inconsistent with the code's provisions and objectives. The tribunal further noted that the application was filed individually by the financial creditor, and thus, the consent of other consortium members was not required.3. Acknowledgment of Debt and Its Impact on Limitation:The tribunal held that the presentation of debt in the financial statements constitutes acknowledgment of debt, which extends the limitation period. The tribunal rejected the corporate debtor's claim that the balance sheet did not provide a specific breakdown of the outstanding amount. It was noted that the outstanding loans, if not repaid, continue to appear in subsequent balance sheets, indicating a continuing liability. Therefore, the tribunal concluded that the acknowledgment of debt in the balance sheets extended the limitation period.4. Authority of the Person Who Filed the Petition:The corporate debtor challenged the authority of the person who signed the petition. The tribunal examined the documents provided by the financial creditor, including the letter of authority from the Deputy General Manager of the Bank to Shri Subrata Barman, and concluded that the person had the requisite authority to file the petition. The tribunal dismissed this ground of the corporate debtor, noting that specific formats for such authorization are not prescribed in the code.5. Appointment of Interim Resolution Professional (IRP):The tribunal approved the appointment of Shri Praveen Bansal as the Interim Resolution Professional (IRP), noting that he had given his consent and no disciplinary proceedings were pending against him. The tribunal ordered the financial creditor to pay an advance fee of Rs. 2,00,000 to the IRP, which would be adjusted against the final bill. The IRP was tasked with conducting the Corporate Insolvency Resolution Process (CIRP) in a time-bound manner and making necessary public announcements as per Sections 13 and 15 of the Insolvency & Bankruptcy Code, 2016.Conclusion:The tribunal admitted the application filed by the financial creditor under Sec. 7 of the Insolvency & Bankruptcy Code, 2016, and declared a moratorium in accordance with Sections 13 and 15 of the IBC, 2016. The tribunal directed the IRP to initiate the CIRP and convene a Committee of Creditors for evolving a resolution plan. The tribunal's decision was based on the acknowledgment of debt by the corporate debtor, the absence of a requirement for consent from all consortium members, and the authority of the person who filed the petition. The matter was listed for filing of the progress report on 30/12/2019.