2022 (1) TMI 720 - AT - Insolvency and Bankruptcy

Tribunal Upholds Corporate Insolvency Process Initiation

Shri M.K. Dhir, Shri Harsh Dhir, Smt. Shilpi Dhir Versus Punjab National Bank Asset Recovery Management Branch, M/s. Dhir Global Industria Pvt. Ltd, Shri Vijay Kumar Gupta, Insolvency Resolution Professional

The Tribunal upheld the initiation of Corporate Insolvency Resolution Process (CIRP) against the corporate debtor, confirming the application was within ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Non-performing assets - Financial Creditors - prohibition under the doctrine / principle of “Nullssuss Commodum Capere Postest De Injuria Sua Propria” - existence of debt and dispute or not - HELD THAT:- It is a settled law that default is committed first and second stage comes as NPA, if it is not regularized in between the period of default and within 90 days thereafter. The Code is a complete Act itself. What Section 7 of the Code requires that a Financial Creditor by filing an application in the requisite format can initiate CIRP against the CD when a Debt is due and payable in law and has not been paid and a default has occurred, the Adjudicating Authority is to initiate CIRP if, he finds default recorded in the Information Utility or evidence of default. So, the criteria for initiation of the CIRP under the Code is limited to three things, (i) there is a debt due and payable in law and has not been paid (ii)Default has occurred (iii) Default is recorded with the Information Utility. Here all the three criteria’s are met and hence initiation of CIRP by the Adjudicating Authority is in order. As far as issue of limitation is concerned the default has been committed on 03.09.2016 and the Application has been filed on 12.03.2019 hence, it is within a period of 3 years as required under Section 238A of the Code R/w 137 of the Limitation Act. Application allowed. Issues Involved:1. Date of Default and Limitation Period.2. Jurisdiction of the Tribunal.3. Entitlement to Claim Dues and Completeness of Application.4. Appointment of Insolvency Resolution Professional (IRP).5. Deposit for IRP Expenses.6. Moratorium under Section 14 of IBC.7. Legality of NPA Declaration.8. Applicability of Doctrine of Nullus Commodum Capere Potest De Injuria Sua Propria.9. Independent Proceedings under IBC and SARFAESI Act.10. Non-cooperation by Appellants with IRP.Detailed Analysis:1. Date of Default and Limitation Period:The Adjudicating Authority considered the date of default as 03.09.2016, as recorded in the certificate of information utility services, instead of the initially mentioned NPA date of 02.12.2016. The application filed on 12.03.2019 was within the limitation period of three years as per Section 7 of the Code read with Article 137 of the Limitation Act.2. Jurisdiction of the Tribunal:The Tribunal confirmed its jurisdiction to entertain the application since the registered office of the corporate debtor is situated in Delhi.3. Entitlement to Claim Dues and Completeness of Application:The Tribunal found that the applicant established the default in payment of the financial debt beyond doubt and that the application was complete. Consequently, the application was admitted.4. Appointment of Insolvency Resolution Professional (IRP):Mr. Vijay Kumar Gupta was appointed as the IRP, subject to the condition that no disciplinary proceedings were pending against him. The IRP was required to make necessary disclosures as per IBBI regulations within one week from the date of the order.5. Deposit for IRP Expenses:The Financial Creditor was directed to deposit a sum of Rs. 2 lakhs with the IRP to cover the expenses for performing his functions, which would be subject to adjustment by the Committee of Creditors.6. Moratorium under Section 14 of IBC:As a consequence of admitting the application, a moratorium as envisaged under Section 14(1) of the Code was imposed, prohibiting actions against the corporate debtor. The terms of Section 14(2) to 14(4) would also apply during the moratorium period.7. Legality of NPA Declaration:The Appellants argued that the NPA declaration on 02.12.2016 was unlawful, referencing an order by the DRT-II Delhi which quashed the NPA declaration. However, the Tribunal noted that the DRT did not confirm that no default occurred or that no amount was due, only setting aside the NPA classification for SARFAESI purposes. This order was under appeal before the DRAT.8. Applicability of Doctrine of Nullus Commodum Capere Potest De Injuria Sua Propria:The Appellants contended that subsequent defaults were prohibited under this legal principle, which prevents a party from benefiting from its own wrong. The Tribunal, however, focused on the existence of debt and default as per the Code.9. Independent Proceedings under IBC and SARFAESI Act:The Tribunal emphasized that proceedings under the Code and SARFAESI Act are independent. The NPA classification under SARFAESI does not impact the proceedings under the Code, which are concerned with the default in payment of debt.10. Non-cooperation by Appellants with IRP:The IRP reported non-cooperation from the Appellants, including the lack of provision of necessary information and documents. The Tribunal noted this lack of assistance but upheld the IRP's efforts to proceed with the resolution process.Conclusion:The Tribunal upheld the order dated 24.05.2021 of the Adjudicating Authority, confirming the initiation of CIRP against the corporate debtor. The application was found to be within the limitation period, and all criteria for initiating CIRP were met. The Tribunal dismissed the appeal, with no order as to costs.