2021 (4) TMI 1124 - Tri - Insolvency and Bankruptcy

Tribunal Admits CIRP Application, Appoints Resolution Professional, Imposes Moratorium

The Tribunal admitted the application for initiation of Corporate Insolvency Resolution Process against the Corporate Debtor, appointing an Interim ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Financial Creditors or not - NPA - time limitation - HELD THAT:- It is seen that there is no dispute that the Corporate Debtor has taken Credit facilities from the Financial Creditor on 28.10.2011. It is also not disputed that the Corporate Debtor has secured Credit Facilities by equitable mortgage of immovable property. The filing of the proceeding before the DRT in 2018 under SARFAESI Act 2002 are also not disputed. The contention of the Corporate Debtor is that the Application is hit by law of limitation as the Financial Creditor has declared the loan account as NPA on different dates i.e. on 05.12.2017 and 04.04.2018. In the instant case the loan account was classified as NPA in two different dates i.e. on 05.12.2017 and 04.04.2018 and the Application was filed on 04.12.2020, even though the two dates are considered as the default date the Application is filed well within the time of 3 years. Therefore, the contention of the Corporate Debtor regarding limitation has no legs to stand. It is clear that when the adjudicating authority is satisfied that a default has occurred the Application must be admitted unless it is incomplete. In this case, the Application is complete in all respects as there is default on the part of the Corporate Debtor. Therefore, as per Section 7(5)(a) of the code, the present application filed under Section 7 of the I&B Code,2016 deserves to be admitted against the Corporate Debtor - Petition admitted - moratorium declared. Issues Involved:1. Default in repayment by the Corporate Debtor.2. Classification of the loan account as Non-Performing Asset (NPA).3. Dispute regarding the acknowledgment of liability documents.4. Application of the limitation period.5. Admissibility of the Corporate Insolvency Resolution Process (CIRP) application.Detailed Analysis:1. Default in repayment by the Corporate Debtor:The Financial Creditor granted a term loan of Rs. 3,00,00,000 to the Corporate Debtor on 28.10.2011, secured by various documents including a Facility Agreement, Power of Attorney, Demand Promissory Note, and an Equitable Mortgage of Property. The Corporate Debtor initially made regular payments but later defaulted, leading to the classification of the account as a Non-Performing Asset (NPA).2. Classification of the loan account as Non-Performing Asset (NPA):The loan account was initially classified as NPA on 05.12.2017. However, due to relief measures provided by the RBI, the classification date was revised to 04.04.2018. The Financial Creditor issued demand notices under the SARFAESI Act on both dates and initiated recovery actions. The Corporate Debtor contested the NPA classification dates but the Tribunal found that the application was filed within the limitation period regardless of which date was considered.3. Dispute regarding the acknowledgment of liability documents:The Corporate Debtor argued that the acknowledgment of liability documents dated 28.10.2014 and 10.10.2017 were fabricated by the Financial Creditor, claiming inconsistencies in handwriting and ink. The Financial Creditor refuted these claims, stating that the documents were properly executed and bore the common seal of the Company. The Tribunal found no merit in the Corporate Debtor’s allegations.4. Application of the limitation period:The Corporate Debtor contended that the application was time-barred under Section 238A of the Insolvency and Bankruptcy Code, read with Articles 36 and 37 of the Limitation Act. The Tribunal referred to the Supreme Court judgment in B.K. Educational Services Pvt. Ltd. vs Parag Gupta & Associates, which clarified that the limitation period for applications under Sections 7 and 9 of the Code is three years from the date of default. Since the application was filed on 04.12.2020, it was within the three-year limitation period from both NPA classification dates.5. Admissibility of the Corporate Insolvency Resolution Process (CIRP) application:The Tribunal noted that the application was complete in all respects and that a default had occurred. Citing the Supreme Court decision in M/s. Innoventive Industries Ltd. vs ICICI Bank & Anr., the Tribunal emphasized that once satisfied of the default, the application must be admitted unless incomplete. The Tribunal found the application complete and admitted it under Section 7 of the Insolvency and Bankruptcy Code, 2016.Order:The Tribunal admitted the application for initiation of CIRP against the Corporate Debtor, prohibiting the institution or continuation of suits, transferring or disposing of assets, foreclosing or enforcing security interests, and recovering property during the moratorium period. The Tribunal appointed Mr. Jasin Jose as the Interim Resolution Professional (IRP) and directed the Financial Creditor to deposit Rs. 2,00,000 for the initiation of the proceedings. The Registry was instructed to communicate the order to all relevant parties.Conclusion:The Tribunal admitted the CIRP application, finding it within the limitation period and complete in all respects, and appointed an IRP to proceed with the resolution process.