Appeal Dismissed: Order Upheld on Validity of Debt and Admission for Insolvency Process

The appeal against the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code by the National Company Law Tribunal was dismissed. The total outstanding debt was found to be valid, not barred by limitation, and correctly classified as Non-Performing Assets. The calculation of debt due was deemed accurate, and the invocation of Strategic Debt Restructuring did not preclude insolvency proceedings. The Tribunal affirmed compliance with procedural requirements and upheld the admission of the application for Corporate Insolvency Resolution Process, concluding that default had occurred, and natural justice was not denied.

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Issues Involved:
1. Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Claims of debt being barred by limitation.
3. Classification of accounts as Non-Performing Assets (NPA).
4. Calculation of debt due and outstanding.
5. Alleged denial of natural justice.
6. Invocation of Strategic Debt Restructuring (SDR) and its implications.
7. Pending proceedings in the Debts Recovery Tribunal.
8. Compliance with procedural requirements under the I&B Code.

Issue-wise Detailed Analysis:

1. Admission of Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The appeal was filed against the order admitting the application under Section 7 of the I&B Code by the National Company Law Tribunal (NCLT), Guwahati Bench. The application was initially filed by United Bank of India and later amended by Punjab National Bank after their merger. The Adjudicating Authority noted the relationship of United Bank of India with the Corporate Debtor since 2011 and detailed the financial transactions and defaults. The total outstanding debt was calculated at Rs. 32,59,99,856.25, and the application was admitted as it was found to be complete and within the limitation period.

2. Claims of Debt Being Barred by Limitation:
The Appellant argued that the debts were barred by limitation, claiming that the accounts were overdue since 30th June 2014 and should have been treated as defaulted from 30th June 2016. However, the Adjudicating Authority found that the last payment was made on 4th March 2019, and the amended petition was filed on 30th December 2020, thus within the limitation period. The Tribunal referred to various acknowledgments of debt and balance confirmations, which extended the limitation period.

3. Classification of Accounts as Non-Performing Assets (NPA):
The Appellant contested the classification of accounts as NPA, arguing that the accounts were irregular from the beginning. The United Bank of India classified the account as NPA on 31st March 2018, and Punjab National Bank on 6th April 2019. The Tribunal found that the classification was in accordance with the banking regulations and the defaults were established through documentary evidence.

4. Calculation of Debt Due and Outstanding:
The Appellant questioned the calculation of the debt due and outstanding. The Adjudicating Authority meticulously reviewed the financial records, including statements of accounts, sanction letters, and board resolutions. The total debt was established at Rs. 32,59,99,856.25, and the Tribunal found the calculations to be accurate and supported by irrefutable documentary evidence.

5. Alleged Denial of Natural Justice:
The Appellant claimed that they were denied natural justice as they were not given sufficient time to file a reply. The Tribunal reviewed the procedural history and found that multiple opportunities were provided to the Corporate Debtor to file their reply. Despite these opportunities, the Corporate Debtor failed to file a timely response. The Tribunal concluded that the principles of natural justice were upheld.

6. Invocation of Strategic Debt Restructuring (SDR) and Its Implications:
The Appellant argued that the invocation of SDR and conversion of debt into equity, resulting in consortium lenders holding 51% of the equity, should preclude the filing of an application under Section 7. The Tribunal rejected this argument, stating that there was no evidence that the financial creditors had taken over the management of the Corporate Debtor. The mere conversion of debt into equity did not negate the creditors' right to initiate insolvency proceedings.

7. Pending Proceedings in the Debts Recovery Tribunal:
The Adjudicating Authority noted that the Financial Creditor had also filed an Original Application before the Debts Recovery Tribunal for recovery of Rs. 22,95,65,980.75, which was pending. The Tribunal clarified that the pendency of proceedings under SARFAESI or other disputes did not prevent the initiation of Corporate Insolvency Resolution Process (CIRP) under the I&B Code.

8. Compliance with Procedural Requirements under the I&B Code:
The Tribunal reviewed the procedural compliance, including the submission of documents, execution of loan agreements, and acknowledgment of debts. It found that the application was filed in the prescribed format, accompanied by necessary documents, and was complete for the purpose of initiating CIRP. The Tribunal emphasized that the application was filed within the statutory period and met all procedural requirements.

Conclusion:
The Tribunal concluded that the Corporate Debtor had availed the loan facilities, the debt was due and payable, and default had occurred. The application under Section 7 was found to be complete and within the limitation period. The appeal was dismissed, and the application for initiating CIRP was admitted. The Tribunal also addressed the procedural aspects and found no denial of natural justice, affirming the adherence to the I&B Code's requirements.

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