Appeals Dismissed Upholding CIRP Initiation | Misjoinder, Debt, Limitation, Section 10A, Locus Standi

The appeals challenging the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor were dismissed by the tribunal. The tribunal upheld the order of the adjudicating authority, ruling against misjoinder of cause of actions, debt not being payable in fact, debt not being barred by limitation, inapplicability of Section 10A of IBC, sustainability of filing Section 7 application despite opposition and pending restructuring proposal, and the locus standi of Kotak Mahindra Bank to file the appeal. The appeals were found lacking in merit, and no costs were awarded.

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Issues Involved:
1. Misjoinder of cause of actions.
2. Debt not payable in fact.
3. Debt barred by limitation.
4. Applicability of Section 10A of IBC.
5. Filing of Section 7 Application despite opposition and pending restructuring proposal.
6. Impugned order against the spirit of IBC.
7. Locus standi of Kotak Mahindra Bank to file the appeal.

Detailed Analysis:

Issue No. (i): Misjoinder of Cause of Actions
The appellant argued that the claims arising from different agreements with different default dates should not be clubbed together. However, the tribunal noted that Section 7 of the IBC allows a financial creditor to file an application either by itself or jointly with other financial creditors when a default has occurred. The tribunal referred to the Supreme Court's judgment in Gaurav Hargovind Bhai Dave Vs. Asset Reconstruction Company (India) Limited, which held that the date of NPA classification is the date of default. In this case, the account was classified as NPA on 31.03.2019, making the cause of action valid. Thus, the plea of misjoinder of cause of actions was dismissed.

Issue No. (ii): Debt Not Payable in Fact
The appellant contended that certain instalments were not due and payable at the time of the default date mentioned in the application. The tribunal clarified that as per Section 3(12) of the IBC, default means non-payment of debt when it becomes due and payable. Since earlier instalments were due and unpaid, the argument that the debt was not payable in fact was rejected.

Issue No. (iii): Debt Barred by Limitation
The appellant argued that the application was time-barred as the default date for the Working Capital facility was 17.12.2015, and the application was filed on 09.01.2020. The tribunal noted that the Corporate Debtor had acknowledged the debt in a letter dated 26.10.2018, making the application filed within three years from the date of acknowledgment. Hence, the debt was not barred by limitation.

Issue No. (iv): Applicability of Section 10A of IBC
The appellant claimed that the application was barred by Section 10A of the IBC, which prevents applications for defaults arising on or after 25.03.2020. The tribunal found that the defaults occurred on 28.01.2019 and 31.01.2019, and the account was classified as NPA on 31.03.2019, prior to the insertion of Section 10A. Therefore, Section 10A was not applicable.

Issue No. (v): Filing of Section 7 Application Despite Opposition and Pending Restructuring Proposal
The appellant argued that the ICICI Bank's unilateral action was against the interest of other lenders who were considering a restructuring proposal. The tribunal noted that ICICI Bank had rejected the restructuring proposal and communicated its decision to other lenders. The tribunal found no legal basis to claim that the application under Section 7 was unsustainable during the pendency of a restructuring proposal.

Issue No. (vi): Impugned Order Against the Spirit of IBC
The appellant contended that the adjudicating authority failed to consider the benefits of restructuring outside the IBC. The tribunal stated that the adjudicating authority is required to ascertain the existence of default and completeness of the application under Section 7(4) of the IBC. Since the application was complete and the default was established, the adjudicating authority had no option but to admit the application.

Issue No. (vii): Locus Standi of Kotak Mahindra Bank to File the Appeal
The respondent argued that Kotak Mahindra Bank had no locus standi to file the appeal as it was not an aggrieved person under Section 61(1) of the IBC. The tribunal agreed, noting that Kotak Mahindra Bank was aware of the proceedings but chose not to participate. Therefore, the appeal by Kotak Mahindra Bank was not maintainable.

Conclusion:
The tribunal found no merit in the appeals and dismissed them, upholding the order of the adjudicating authority to initiate CIRP against the Corporate Debtor. No costs were awarded.

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