2020 (3) TMI 22 - Tri - Insolvency and Bankruptcy

Tribunal rules in favor of bank on debt acknowledgment issue, upholds authority of Chief Manager.

The tribunal found in favor of the applicant bank, ruling that the petition was not barred by limitation as the debt acknowledgment letters fell within ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - time limitation - existence of debt and dispute or not - HELD THAT:- On perusal of the records it is found that Page Nos. 160 to 165 are balance confirmation letters issued by corporate debtor on different dates from 02.04.2013 to 31.03.2017 acknowledging the debt. That the said letters are duly stamped and signed by the corporate debtor confirming the outstanding debt in their loan account. That, this document itself is sufficient to prove that there exists financial debt - On perusal of the records it is found that the letter of authority dated 04.08.2018 issued by General Manager of the applicant bank authorising Mr. D Koteshwara Rao is proper and valid. As regards the other objections like denial of having taken any loan from the applicant bank appears to be illusory, imaginary and not sustainable in the eyes of law when volumes of documents produced by the bank evidencing execution of documents like term loan agreement, demand promissory note, undertaking to pay instalments, letter of hypothecation etc. are placed on record by the applicant bank. It is needless to add that all the above referred documents bear the stamp and signature of the corporate debtor. The Adjudicating Authority is of the considered view that there is a debt due to 'financial creditor' and there is default on the part of the corporate debtor. In the instant application, from the material placed on record by the Applicant, this Authority is satisfied that the application is complete in all respect and the Corporate Debtor committed default in paying the financial debt to the Applicant and the respondent company has acknowledged the debt - In the instant case, the documents produced by the Financial Creditor clearly establish the 'debt' and there is default on the part of the Corporate Debtor in payment of the 'financial debt'. The application under Section 7 (2) of the IB Code is complete in all respects and there is debt due to the 'financial Creditor' and there is default on the part of the 'corporate debtor'. Hence, there is no alternative but to admit the application in absence of any infirmity - the petitioner/financial creditor having fulfilled all the requirements of Section 7 of the Code, the instant petition deserves to be admitted. Petition admitted - moratorium declared. Issues Involved:1. Barred by Limitation2. Pre-existing Dispute3. Validity of Authority Issued to Chief Manager4. Denial of Credit Facilities5. Lack of Credible EvidenceIssue-wise Detailed Analysis:1. Barred by Limitation:The respondent argued that the petition is barred by limitation. However, the tribunal found that balance confirmation letters issued by the corporate debtor on various dates from 02.04.2013 to 31.03.2017 acknowledged the debt. These letters, duly stamped and signed, confirmed the outstanding debt, proving the existence of financial debt. Therefore, the application filed on 1st April 2019 was within the limitation period.2. Pre-existing Dispute:The respondent claimed a pre-existing dispute between the parties. The tribunal, however, found that the volumes of documents produced by the applicant bank, including the term loan agreement, demand promissory note, undertaking to pay installments, and letters of hypothecation, all bearing the corporate debtor's stamp and signature, indicated no such dispute. The objections raised were deemed illusory and not sustainable.3. Validity of Authority Issued to Chief Manager:The respondent questioned the validity of the authority issued to the Chief Manager of the bank. The tribunal reviewed the letter of authority dated 04.08.2018 issued by the General Manager of the applicant bank and found it proper and valid.4. Denial of Credit Facilities:The respondent denied availing of credit facilities from the applicant bank. The tribunal dismissed this claim, noting the extensive documentation provided by the bank, including the term loan agreement, demand promissory note, and letters of hypothecation, all signed by the corporate debtor. These documents were sufficient to establish that the credit facilities were indeed availed.5. Lack of Credible Evidence:The respondent argued that the applicant had not provided credible evidence. The tribunal found this objection vague and unsustainable. The applicant had submitted comprehensive documentation, including sanction letters, balance confirmations, and statements of accounts, which collectively established the debt and the default by the corporate debtor.Findings:The tribunal concluded that the application was complete in all respects and the corporate debtor had committed default in paying the financial debt. The tribunal referenced the Supreme Court judgments in 'Innoventive Industries Ltd. v. ICICI Bank' and 'Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd.,' which clarified that the adjudicating authority needs to be satisfied that a default has occurred based on the evidence provided by the financial creditor.Order:The petition was admitted, and a moratorium was declared prohibiting:- Institution or continuation of suits or proceedings against the corporate debtor.- Transfer, encumbrance, or disposal of any assets or legal rights by the corporate debtor.- Actions to foreclose, recover, or enforce any security interest.- Recovery of any property by an owner or lessor.The supply of essential goods and services to the corporate debtor was directed to continue during the moratorium period. The moratorium would remain effective until the completion of the corporate insolvency resolution process or until a resolution plan is approved or liquidation is ordered.The tribunal appointed CMA George Samuel as the interim resolution professional and directed communication of the order to all relevant parties. The petition was disposed of with no order as to costs.