NCLT Mumbai: Admits Section 7 Petition, Initiates CIRP

The National Company Law Tribunal (NCLT), Mumbai Bench, had jurisdiction to adjudicate a petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by a Financial Creditor against a Corporate Debtor. The Financial Creditor proved the existence of financial debt and default, supported by the acknowledgment of debt in the Corporate Debtor's balance sheet. The Tribunal admitted the petition, initiated the Corporate Insolvency Resolution Process (CIRP), and appointed an Interim Resolution Professional (IRP) to manage the Corporate Debtor. A moratorium was declared, and essential services were to continue during the process.

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Issues Involved:
1. Jurisdiction and maintainability of the petition.
2. Existence of financial debt and default.
3. Requirement of a financial contract.
4. Admission of debt in balance sheet.
5. Initiation of Corporate Insolvency Resolution Process (CIRP).
6. Appointment of Interim Resolution Professional (IRP).

Issue-wise Detailed Analysis:

1. Jurisdiction and Maintainability of the Petition:
The petition was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by Gajendra Investment Limited ("the Financial Creditor or FC") against Rushabh Civil Contractor Private Limited ("the Corporate Debtor or CD"). The Corporate Debtor is a private company incorporated under the Companies Act, 1956, and registered in Maharashtra, Mumbai. Therefore, the National Company Law Tribunal (NCLT), Mumbai Bench, has jurisdiction to adjudicate this petition.

2. Existence of Financial Debt and Default:
The Financial Creditor advanced Rs.3,77,00,000/- to the Corporate Debtor on 14.09.2016. The Corporate Debtor confirmed the account on 15.04.2017 but failed to pay the interest and only deposited part TDS of Rs.2,66,558/- on 01.08.2018. The default occurred on 19.06.2019, with an outstanding amount of Rs.1,51,36,000/- as of 31.05.2019. The Financial Creditor provided detailed transactions and particulars of the claim, including the balance sheet of the Corporate Debtor for the year ended 31.03.2017, which acknowledged the debt under "Short Term Borrowings Note No. 7 – Inter Corporate Loans."

3. Requirement of a Financial Contract:
The Corporate Debtor argued that the Financial Creditor failed to produce any document termed as a financial contract, which should set out the terms of the financial debt, including tenure, interest payable, and repayment schedule. The petitioner's admission in Form I, Part V, indicated "NA" for the financial contract, and the listed documents did not demonstrate the terms of the financial debt. The Corporate Debtor contended that there was no written or oral financial contract in support of the claim.

4. Admission of Debt in Balance Sheet:
The Tribunal noted that the balance confirmation statement signed by the Corporate Debtor and the acknowledgment of debt in the balance sheet constituted sufficient evidence of the debt. The Supreme Court's ruling in "Innovative Industries v. ICICI Bank" and "Asset Reconstruction Company (India) Limited v. Bishal Jaiswal and Anr." established that acknowledgment of debt in the balance sheet amounts to acknowledgment under Section 18 of the Limitation Act, 1963, giving rise to a fresh period of limitation.

5. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Tribunal found that the Financial Creditor had demonstrated the existence of debt and default. The application was complete in all respects, and the debt exceeded the minimum amount stipulated under Section 4(1) of the IBC. Therefore, the Tribunal admitted the petition and ordered the initiation of CIRP against the Corporate Debtor.

6. Appointment of Interim Resolution Professional (IRP):
The Financial Creditor proposed Mr. Rajesh Mittal as the Interim Resolution Professional (IRP), who had filed his written communication and certificate of registration. The Tribunal appointed Mr. Rajesh Mittal as the IRP to carry out the functions as per the IBC.

Order:
The Tribunal admitted the petition and ordered the initiation of CIRP against the Corporate Debtor. A moratorium under Section 14 of the IBC was declared, 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 was to continue during the moratorium. The IRP was directed to make a public announcement of the CIRP and take over the management of the Corporate Debtor. The Financial Creditor was instructed to deposit Rs.2,00,000/- with the IRP for expenses. The Registry was directed to communicate the order to relevant parties and update the Corporate Debtor's master data with the Registrar of Companies.

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