Tribunal validates creditor's CIRP initiation with timely filing based on debt acknowledgment.

The Tribunal found in favor of the Financial Creditor in the case, ruling that the Power of Attorney and Board Resolution authorizing the initiation of Corporate Insolvency Resolution Process (CIRP) were valid. The date of default was determined to be crucial, not the date of Non-Performing Asset (NPA) classification. The petition was considered timely filed within the limitation period due to an acknowledgment of debt by the Corporate Debtor. Consequently, the Tribunal admitted the petition, initiated CIRP, declared a moratorium, and appointed an Interim Resolution Professional.

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Issues Involved:

1. Validity of the Power of Attorney and Board Resolution authorizing the initiation of CIRP.
2. Date of default and classification of Non-Performing Assets (NPA).
3. Limitation period for filing the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016.
4. Acknowledgment of debt by the Corporate Debtor.
5. Admission of the petition and initiation of CIRP.

Issue-wise Detailed Analysis:

1. Validity of the Power of Attorney and Board Resolution authorizing the initiation of CIRP:

The Corporate Debtor contended that the Financial Creditor failed to place on record the Board Resolution authorizing Mr. Prasenjit Roy to initiate proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Tribunal found this contention incorrect, citing the Ministry of Corporate Affairs Notification No. 5.0.109 (E) dated 27th February 2019, which allows a person duly authorized by the Board of Directors to file an Application for initiating CIRP. The Financial Creditor's Board Resolution dated 21/06/2019 authorized officers in the cadre of Scale-IV to sign applications on behalf of the Financial Creditor, making the petition non-defective in this regard.

2. Date of default and classification of Non-Performing Assets (NPA):

The Corporate Debtor argued there was a defect regarding the date of default and the date of NPA mentioned in the petition. The Tribunal clarified that the date of NPA is irrelevant under the Insolvency and Bankruptcy Code, 2016, which only considers the date of default. The petition mentioned the date of default as 31.03.2017, the date when the first default in servicing of interest occurred. Therefore, the petition was considered valid with the date of default being 31.03.2017.

3. Limitation period for filing the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016:

The Corporate Debtor claimed the petition was filed beyond the three-year limitation period. The Tribunal relied on Section 18 of the Limitation Act, 1963, which allows a fresh limitation period to start from the date of acknowledgment of the debt. The Hon'ble Supreme Court in Rajendra Narottamdas Sheth and Another v. Chandra Prakash Jain and Another held that acknowledgment of debt in writing within the initial three-year period from the date of default extends the limitation period. The Tribunal found that a letter dated 09.10.2018 from the Corporate Debtor to State Bank of India, with a copy marked to the Financial Creditor, acknowledged the debt, extending the limitation period to 09.10.2021. Thus, the petition filed on 10.10.2020 was within the limitation period.

4. Acknowledgment of debt by the Corporate Debtor:

The Tribunal noted multiple acknowledgments of debt by the Corporate Debtor, including balance confirmations and letters to bankers. The letter dated 09.10.2018 was considered an acknowledgment of debt, extending the limitation period. The Tribunal also considered letters dated 07/07/2022 and 01/08/2022 regarding the One Time Settlement (OTS) proposal as further admissions of liability by the Corporate Debtor.

5. Admission of the petition and initiation of CIRP:

The Tribunal found the petition complete in all respects as required by law. The Corporate Debtor was in default of a debt due and payable, exceeding the minimum amount stipulated under Section 4(1) of the Code. Consequently, the Tribunal admitted the application and initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. A moratorium under Section 14 of the IBC was declared, and Mr. Rajesh Kumar Agarwal was appointed as the Interim Resolution Professional (IRP).

Order:

The application filed by the Financial Creditor was admitted, a moratorium was declared, and the IRP was appointed to carry out the functions as per the Code. The Financial Creditor was directed to deposit a sum of Rs. 3,00,000/- with the IRP to meet initial expenses. The Tribunal scheduled a follow-up hearing on 20.10.2022 for filing the periodical report.

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