2022 (8) TMI 654 - Tri - Insolvency and Bankruptcy

Tribunal asserts jurisdiction in Mumbai, upholds debt acknowledgment, admits IBC Section 7 petition. Fraud allegations dismissed.

Religare Finvest Limited Versus Perpetual Capital and Servicing Private Limited

The Tribunal established jurisdiction based on the Corporate Debtor's location in Mumbai. The Petitioner claimed default in loan repayment, supported by ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - it is alleged that the Petitioner had unconditionally and irrevocably sold, transferred and assigned the loans granted to certain borrowers, to the Respondent and SCCPL - it is alleged that the loans sold turned out to be related party transactions and funds siphoning scheme adopted by the Petitioner which led to filing of multiple suits - HELD THAT:- The Respondent is not disputing the fact that the outstanding amount is due and payable to the Petitioner. Further, infact vide Settlement Agreement dated 01.07.2017 to which the Respondent is a signatory party acknowledged the debt of Rs.260,00,00,000/-. The Settlement Agreement was entered into pursuant to the litigation before the Hon’ble Bombay High Court to settle issues. After reading settlement agreement by any stretch of imagination it cannot be concluded that the said agreement has altered the transaction between the parties. At the same time, it was acknowledged that basis the loan agreement dated 20.06.2015 a loan facility was availed to the tune of Rs.260,00,00,000/- - In the present case the application is filed by the Financial Creditor and the amount was disbursed against time value of money. Moreover, we hold that the facts of the present case are distinguishable on the ground that the settlement agreement on record ratifies that fact the Respondent was under a continuing obligation to repay the outstanding amount of Rs.260,00,00,000/- pursuant to loan agreement dated 20.06.2015. The acknowledgment meets all the essential ingredients of Section 18 of the Limitation Act,1963. Therefore, the debt is within the period of limitation. The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount stipulated under section 4(1) of the IBC. Therefore, the debt and default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor - petition admitted - moratorium declared. Issues Involved:1. Jurisdiction of the Tribunal.2. Default in repayment of loan.3. Acknowledgment of debt and limitation period.4. Validity and impact of the Settlement Agreement.5. Allegations of fraud and related party transactions.6. Nature of the debt under the Insolvency and Bankruptcy Code (IBC).7. Admissibility of the petition under Section 7 of the IBC.8. Appointment of Interim Resolution Professional (IRP).9. Moratorium under Section 14 of the IBC.Detailed Analysis:1. Jurisdiction of the Tribunal:The Tribunal established its jurisdiction to hear the petition as the Corporate Debtor is registered with the Registrar of Companies, Maharashtra, Mumbai. The registered office of the Corporate Debtor is situated in Mumbai, granting the Mumbai Bench of the National Company Law Tribunal (NCLT) the authority to adjudicate the matter.2. Default in Repayment of Loan:The Petitioner, Religare Finvest Limited, claimed that the Corporate Debtor defaulted in repaying a loan amount of Rs. 228.75 Crores, which was sanctioned on 08.06.2015. The total amount claimed to be in default was Rs. 318.91 Crores as of 31.05.2019, with the date of default being 24.06.2016. The Petitioner provided evidence of disbursements and default through statements of accounts and recall notices.3. Acknowledgment of Debt and Limitation Period:The Petitioner argued that the Respondent acknowledged the debt in its financial statement for the year ending 31.03.2016 and in a Settlement Agreement dated 01.07.2017. The Tribunal referred to the case of Asset Reconstruction Company (India) Limited vs. Bishal Jaiswal & Anr., which held that balance sheets can serve as acknowledgment under Section 18 of the Limitation Act, 1963. Consequently, the petition filed on 06.08.2019 was deemed within the limitation period.4. Validity and Impact of the Settlement Agreement:The Respondent contended that the Settlement Agreement dated 01.07.2017 superseded the original loan agreement and imposed a 'best effort basis' obligation to repay. However, the Tribunal found that the Settlement Agreement did not alter the original loan transaction and acknowledged the debt of Rs. 260 Crores. The Tribunal emphasized that the obligation to repay was a continuing one, as stipulated in clauses 3.4 and 3.7 of the Settlement Agreement.5. Allegations of Fraud and Related Party Transactions:The Respondent alleged that the loans were part of a fraudulent scheme involving related party transactions, leading to multiple litigations, including a suit before the Bombay High Court. The Settlement Agreement was purportedly a result of these litigations. Despite these allegations, the Tribunal focused on the acknowledgment of debt and the continuing obligation to repay.6. Nature of the Debt under the IBC:The Respondent argued that the debt arising from the Settlement Agreement could not be treated as a financial debt under the IBC. The Tribunal, however, distinguished the present case from others, such as M/s Brand Realty Services Ltd. vs. Sir John Bakeries India Private Limited, by noting that the debt was acknowledged and continued under the original loan agreement, thus qualifying as a financial debt.7. Admissibility of the Petition under Section 7 of the IBC:The Tribunal referred to the Supreme Court's rulings in E.S. Krishnamurthy vs. Bharath Hi-Tecch Builders (P) Limited and Innoventive Industries, which mandate that the Adjudicating Authority must ascertain the existence of debt and default. The Tribunal found that the debt was due and payable, and the default was established, satisfying the requirements for admitting the petition under Section 7 of the IBC.8. Appointment of Interim Resolution Professional (IRP):The Financial Creditor did not propose an IRP, so the Tribunal appointed Mr. Suresh Baburao Shingte as the IRP to carry out the functions as per the IBC.9. Moratorium under Section 14 of the IBC:The Tribunal ordered a moratorium, effective from the date of the order until the completion of the Corporate Insolvency Resolution Process (CIRP) or the approval of a resolution plan. The moratorium included the suspension of suits, transfer of assets, foreclosure actions, and recovery of property by owners or lessors.Conclusion:The Tribunal admitted the petition under Section 7 of the IBC, initiating the CIRP against the Corporate Debtor. The IRP was appointed, and a moratorium was imposed as per the provisions of the IBC.