2022 (4) TMI 1036 - Tri - Insolvency and Bankruptcy

Tribunal Admits Application for Corporate Insolvency Resolution Process

The Tribunal found the application timely filed within the limitation period, upheld the competency of the applicant, and confirmed the existence of a ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Non-Performing assets - existence of debt and dispute or not - application is barred by limitation or not - application is filed by a competent person or not - Creditor-Debtor relationship between the Financial Creditor and Corporate Debtor herein or not? Whether the application is barred by limitation? - HELD THAT:- On perusal of the records, it is found that the Financial Creditor has filed this application on 31.03.2021. The application has been filed within the prescribed period of limitation. Hence the contention taken by the Corporate Debtor regarding limitation has no force - From a reading of Part IV of the application and the documents annexed thereto; wherein it is clearly stated that the loan accounts of the Corporate Debtor in the Federal Bank Limited became NPA on 05.06.2018 and the date of default is also same - this Application is maintainable before this Tribunal. Whether this application is filed by a competent person? - HELD THAT:- The Financial Creditor has the proper authority to file the present application through the Power of Attorney Holder, and the objection raised by the counsel for the Corporate Debtor is merely incongruous, and therefore, holds no water. Moreover, the Assistant Vice President of the Financial Creditor had signed the application as an authorised person of the Financial Creditor with specific authorization letter to file Insolvency Application before this Bench. Hence, the technical objection on the ground of maintainability is only for the sake of objecting and hence stands rejected. Whether there is a Creditor-Debtor relationship between the Financial Creditor and Corporate Debtor herein? - HELD THAT:- There is a Creditor- Debtor relationship between the Financial Creditor and the Corporate Debtor, since the Corporate Debtor admitted that they received money from the Financial Creditor through various documents produced before this Tribunal and the Corporate Debtor has no case that they have repaid the money received from the Financial Creditor - the Corporate Debtor failed to honour the conditions in the restructuring proposal, and thus the restructuring proposal was rejected. From the above it is clear that the Corporate Debtor is not willing to make any payment, instead they want to prolong the payment by filing various cases. As there is a default in the payment of the financial debt, which has been confirmed by them in the counter affidavit that the Financial Creditor paid the money to the Corporate Debtor, we are of the view that the present application filed by the Financial Creditor satisfies all the definitions of “Financial Creditor”, “Default” and “Financial Debt” and qualifies for filing an application under Insolvency and Bankruptcy Code. By mentioning various technical snags, the Corporate Debtor cannot wash its hands in repaying the amount borrowed, which is a financial debt owed by them. Hence, there is a Creditor-Debtor relationship with them. The application filed in the capacity as a ‘Financial Creditor’ for a ‘financial debt’ which is recoverable from the Corporate Debtor viz., M/s. Foodco Delicacies India Pvt. Ltd. is a fit case for admission and initiation of CIRP against the Corporate Debtor. The documents produced on record prove the disbursement of various loan facilities by the Financial Creditor to the Corporate Debtor and their failure to honour the payment even after approval of the restructuring proposal - The Corporate Debtor committed default in repayment of the loan amount to the Financial Creditor, and hence its Loan Account was declared as NPA - the existence of debt and default is reasonably established by the Financial Creditor as a major constituent for admission of an application under Section 7(4) of the I&B Code. The Application under Sub-Section (4) of Section 7 of I&B Code, 2016 is complete in all respects - Application admitted - moratorium declared. Issues Involved:1. Whether the application is barred by limitationRs.2. Whether this application is filed by a competent personRs.3. Whether there is a Creditor-Debtor relationship between the Financial Creditor and Corporate DebtorRs.Detailed Analysis:Issue 1: Whether the application is barred by limitationRs.The Tribunal examined Part IV of the application, which stated the loan accounts were classified as NPA on 05.06.2018, and the date of occurrence of default for the purpose of IBC was the same. Section 238A of the IBC, 2016, which incorporates the Limitation Act, 1963, was referenced. Article 137 of the Limitation Act specifies a three-year period for applications, commencing from the date the right to apply accrues. The Tribunal cited the Hon’ble NCLAT's ruling in Neelkanth Township and Construction Pvt. Ltd. vs. Urban Infrastructure Trustee Ltd., which clarified that the Limitation Act does not constrain the IBC. The Tribunal concluded that the application, filed on 31.03.2021, was within the prescribed limitation period, rejecting the Corporate Debtor's contention regarding limitation.Issue 2: Whether this application is filed by a competent personRs.The Tribunal reviewed the Power of Attorney dated 21.06.2005, issued to the Assistant Vice President (Legal) of the Financial Creditor, and the Authorization dated 15.03.2021. The Tribunal referenced the Hon’ble NCLAT's decision in Sh. Rajendra Narottamdas Sheth & Anr. Vs Sh. Chandra Prakash Jain & Ors, which upheld the validity of a General Power of Attorney for filing applications under IBC. The Tribunal found that the Financial Creditor had proper authority to file the application through the Power of Attorney Holder, and the Assistant Vice President had signed the application with specific authorization. The objections raised by the Corporate Debtor were deemed incongruous and rejected.Issue 3: Whether there is a Creditor-Debtor relationship between the Financial Creditor and Corporate DebtorRs.The Tribunal examined the records and found a clear Creditor-Debtor relationship, with the Corporate Debtor admitting to receiving money from the Financial Creditor. Despite several restructuring proposals and meetings, the Corporate Debtor failed to honor the conditions, leading to the rejection of the restructuring proposal. The Tribunal observed that the Corporate Debtor was attempting to prolong payment by filing various cases. The Tribunal concluded that the application satisfied all definitions of “Financial Creditor,” “Default,” and “Financial Debt” under the IBC, confirming the Creditor-Debtor relationship.Final Order:The Tribunal admitted the application for initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The moratorium under Section 14 of the Code was declared, prohibiting the institution of suits, transferring/encumbering assets, etc. An Interim Resolution Professional (IRP) was appointed to carry out the functions as per IBC. The Financial Creditor was directed to deposit Rs. 2,00,000 with the IRP for initial expenses. The IRP was instructed to perform duties under Sections 15, 17, 18, 19, 20, and 21 of the IBC and report progress within 30 days. The Registry was directed to communicate the order to relevant parties and update the Corporate Debtor's Master Data. Additional objections and documents were considered, and no further orders were deemed necessary for the related IAs, which were disposed of accordingly.