2022 (6) TMI 1137 - Tri - Insolvency and Bankruptcy

Tribunal Admits Financial Creditor's Insolvency Application: CIRP Initiated

The tribunal admitted the Financial Creditor's application under Section 7 of the Insolvency and Bankruptcy Code, initiating the Corporate Insolvency ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Time Limitation - HELD THAT:- The Corporate Debtor contended that the Financial Creditor is guilty of forum shopping and has filed proceedings before DRT for the same cause. However, it is to be noted that the purpose of proceedings under Recovery of Debts Due to Banks and Financial Institutions (RDDBFI Act), 1993 is debt recovery and an action under the Insolvency and Bankruptcy Code aims at resolution of the insolvency of the Corporate Debtor. As such, taking action under one legislation cannot curtail the Financial Creditor’s right under the Insolvency and Bankruptcy Code 2016. Time Limitation - HELD THAT:- It can be seen that the date of default is mentioned to be 30.09.2012 i.e the date on which the account became NPA. Accordingly, the limitation period for filing the application would ordinarily end on 30.09.2015. However, balance sheets of the Corporate Debtor from the year 2012 to 2019 have been placed on record by the Financial Creditor in the supplementary affidavit dated 6.02.2020. In these Balance sheets, multiple acknowledgments of debt to the Financial Creditor have been made by the Corporate Debtor, specifically, the Corporate Debtor has acknowledged the debt in the balance sheets of Financial Years 2012-13, 2014-15, 2015-16, 2016-17, 2017-18 and 2018-19 - due to the specific admissions of debt by the Corporate Debtor, section 18 of the Limitation Act, 1963 will come into effect and result in computation of fresh limitation period of three years from the date of acknowledgment in each balance sheet. Since the last of such acknowledgments was made on 31st March 2019, the limitation period would last up till 31st March 2022. As such, the present petition is well within limitation. Whether admissions are not valid as the debt so acknowledged by the Corporate Debtor in the said balance sheets? - HELD THAT:- This Adjudicating Authority is satisfied that the debt albeit disputed was due from the Corporate Debtor to the Financial Creditor and the Corporate Debtor has made a default in the payment of the same and has also acknowledged the said fact and therefore the plea of Corporate Debtor is untenable and needs to be rejected. Application admitted - moratorium declared. Issues Involved:1. Forum Shopping Allegation2. Limitation Period for Filing the Petition3. Validity of Debt Acknowledgment and Dispute of DebtIssue-Wise Detailed Analysis:1. Forum Shopping Allegation:The Corporate Debtor argued that the Financial Creditor was guilty of forum shopping by filing proceedings before the Debt Recovery Tribunal (DRT) for the same cause. However, the tribunal clarified that the proceedings under the Recovery of Debts Due to Banks and Financial Institutions (RDDBFI Act), 1993 aim at debt recovery, whereas the Insolvency and Bankruptcy Code (IBC) aims at resolving the insolvency of the Corporate Debtor. As such, taking action under one legislation does not curtail the Financial Creditor's right under the IBC.2. Limitation Period for Filing the Petition:The Corporate Debtor contended that the petition was barred by limitation, arguing that the default occurred on 30.09.2012, and the petition filed in April 2019 was beyond the three-year limitation period. However, the Financial Creditor provided balance sheets from 2012 to 2019, showing multiple acknowledgments of debt by the Corporate Debtor. The tribunal relied on the Supreme Court judgment in Laxmi Pat Surana v. Union Bank of India, which held that acknowledgment of debt in writing before the expiration of the limitation period renews the limitation period for another three years. Since the last acknowledgment was made on 31st March 2019, the limitation period extended to 31st March 2022, making the petition timely.3. Validity of Debt Acknowledgment and Dispute of Debt:The Corporate Debtor argued that the debt acknowledged in the balance sheets was disputed due to alleged breaches by the bank in providing credit facilities. The tribunal referred to the Supreme Court's decision in Innoventive Industries Ltd. v. ICICI Bank, which stated that the adjudicating authority needs only to verify the occurrence of default, irrespective of disputes over the debt. Additionally, the tribunal cited Khan Bahadur Shapoor Freedom Mazda v. Durga Prasad, emphasizing that an acknowledgment of debt implies the existence of a debtor-creditor relationship. The tribunal found that the debt was due, acknowledged, and defaulted upon by the Corporate Debtor, thus rejecting the Corporate Debtor's plea.Conclusion and Order:- The application filed by the Financial Creditor under Section 7 of the IBC for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor was admitted.- A moratorium under Section 14 of the IBC was declared, effective until the completion of the CIRP or approval of the resolution plan.- Public announcement of the CIRP was ordered immediately.- Mr. Sunil Kumar Agarwal was appointed as the Interim Resolution Professional (IRP).- The Financial Creditor was directed to deposit Rs. 2,00,000 with the IRP for expenses related to public notice and inviting claims.- The tribunal directed communication of the order to the Financial Creditor, Corporate Debtor, and IRP by Speed Post, email, and WhatsApp.- The Financial Creditor was also instructed to serve a copy of the order on the IRP and the Registrar of Companies, West Bengal, Kolkata.The next hearing for filing the progress report was scheduled for 2nd August 2022.