Tribunal Admits CIRP Application Against Corporate Debtor: Moratorium Declared, Interim Resolution Professional Appointed

The Tribunal admitted the application for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The application under Section 7 of the I&B Code, 2016, was admitted, and a moratorium was declared under Section 14 of the I&B Code. Ms. Vineeta Maheswari was appointed as the Interim Resolution Professional (IRP), and the Financial Creditor was directed to deposit Rs. 5,00,000/- with the IRP for expenses. A public announcement of the CIRP was ordered, and essential supplies to the Corporate Debtor were to continue uninterrupted.

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Issues Involved:
1. Barred by Limitation in terms of Limitation Act, 1963.
2. Non-issuance of Demand Notice.
3. Genuineness of the Mortgage Deed and charging of higher interest by the Corporate Debtor.

Issue-wise Detailed Analysis:

1. Barred by Limitation in terms of Limitation Act, 1963:
The Corporate Debtor argued that the application by the Financial Creditor was barred by limitation since the account was declared a Non-Performing Asset (NPA) on 27.09.2014, making 27.09.2017 the latest date for filing an application under the Limitation Act, 1963. However, the Financial Creditor submitted that the Corporate Debtor had admitted its liability in a letter dated 29.05.2019, expressing willingness to settle dues. This letter, along with other documents like the Deed of Pledge and audited financial statements, indicated acknowledgment of debt by the Corporate Debtor. The Tribunal, relying on the judgment in Dena Bank vs. C. Shivakumar Reddy, found that the letter dated 29.05.2019 fulfilled the requirement of Section 18 of the Limitation Act, 1963, thus rejecting the contention that the petition was barred by limitation.

2. Non-issuance of Demand Notice:
The Corporate Debtor contended that the application was not maintainable due to the non-issuance of a Demand Notice. The Tribunal clarified that the issuance of a Demand Notice is a prerequisite under Section 9 of the I&B Code, not under Section 7. Hence, the Tribunal found no merit in the Corporate Debtor's contention regarding the non-issuance of a Demand Notice.

3. Genuineness of the Mortgage Deed and charging of higher interest by the Corporate Debtor:
The Corporate Debtor questioned the genuineness of the Mortgage Deed executed on 26.12.2014, claiming it incorrectly covered certain assets. Additionally, the Corporate Debtor argued that the interest charged was higher than agreed upon. The Tribunal cited the Supreme Court's judgment in Innoventive Industries Ltd. vs. ICICI Bank, stating that it is not within the Tribunal's purview to determine the validity of the Mortgage Deed or interest rates at this stage. These issues are to be addressed by the Resolution Professional. Therefore, the Tribunal found no merit in the Corporate Debtor's contentions regarding the Mortgage Deed and interest rates.

Findings/Observations:
The Tribunal noted that the Financial Creditor had established the existence of a financial debt exceeding Rs. 1,00,00,000/- and that the Corporate Debtor had defaulted on this debt. The application was found to be complete and filed in the proper form. Consequently, the Tribunal admitted the application for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.

Order:
The application filed under Section 7 of the I&B Code, 2016, was admitted. The Tribunal declared a moratorium under Section 14 of the I&B Code, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovery actions against the Corporate Debtor. The supply of essential goods or services to the Corporate Debtor was to continue uninterrupted. Ms. Vineeta Maheswari was appointed as the Interim Resolution Professional (IRP). The Financial Creditor was directed to deposit Rs. 5,00,000/- with the IRP for expenses. A public announcement of the CIRP was ordered, and the Registry was directed to communicate the order to relevant parties immediately.

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