2022 (10) TMI 12 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Process Initiated with Moratorium Order and Interim Resolution Professional Appointment

The Tribunal admitted the application for initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, holding that the ... 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:- It is abundantly clear that the Corporate Debtor had acknowledged its obligation under OTS for an amount of Rs. 2.50 Crore as is evident from the order of the Hon’ble Division Bench in INTERNATIONAL ASSET RECONSTRUCTION COMPANY PVT. LTD. VERSUS M/S ECLAT INDUSTRIES LTD., THE STATE OF BIHAR THROUGH ITS CHIEF SECRETARY, DEPARTMENT OF INDUSTRIES, INDUSTRIES DEVELOPMENT COMMISSIONER, DIRECTOR, OFFICE OF THE DIRECTORATE OF TECHNICAL DEVELOPMENT DEPARTMENT OF INDUSTRIES, BANK OF BARODA (OPERATING AGENCY) THROUGH ITS CHIEF MANAGER, CANARA BANK THROUGH ITS CHIEF MANAGER, PATNA [2017 (11) TMI 2004 - PATNA HIGH COURT]. It looks that no further appeal was filed by the Corporate Debtor challenging the decision. The contention of the Corporate Debtor is found to be incorrect, in view of the factual position stated hereinabove and which is supported by number of documents. It is a clear case, where, despite opportunities given to the Corporate Debtor to pay the balance amount of OTS, the Corporate Debtor failed to pay the balance amount and the OTS was revoked by the Bank, as is evident from the letter dated 23.07.2014. It is also clear from the documents shown above, the Corporate Debtor was merely seeking extension, one after another and this could not continue for all times to come as the Financial Creditor was required to invoke its remedy under law within the period of limitation and which clearly happened in the present case. There are no hesitation to hold that the present application which was filed before this Adjudicating Authority on 12.12.2019 is well within the period of limitation as is shown from the facts, dates and documents above, the limitation period from time to time stood extended. The present petition made by the Financial Creditor is complete in all respects as required by law. The Petition establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under section 4 (1) of the Code, stipulated at the relevant point of time. Application admitted - moratorium declared. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Determination of the date of default and whether the application is barred by limitation.3. Evaluation of the continuous acknowledgment of debt by the Corporate Debtor.4. Validity of the One-Time Settlement (OTS) agreements and their impact on the limitation period.Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP):The Financial Creditor, represented by International Asset Reconstruction Company Private Limited, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate CIRP against the Corporate Debtor, ECLAT Industries Limited. The Financial Creditor argued that the Corporate Debtor had availed secured credit facilities from IDBI Bank and Bank of Baroda, which were later assigned to the Financial Creditor. The Corporate Debtor failed to adhere to the terms of the restructuring agreements and subsequent OTS agreements, leading to a significant outstanding debt.2. Determination of the Date of Default and Limitation:The Corporate Debtor contended that the petition was barred by limitation, asserting that the date of default was 11.01.2013, and thus the limitation period ended on 10.01.2016. The Financial Creditor, however, argued that the limitation period was extended due to continuous acknowledgments and new agreements between the parties. The Tribunal examined various communications and agreements, noting that the Corporate Debtor repeatedly acknowledged its debt and sought extensions for payment, which extended the limitation period.3. Continuous Acknowledgment of Debt:The Tribunal reviewed numerous documents, including letters and court orders, which demonstrated that the Corporate Debtor continuously acknowledged its debt to the Financial Creditor. Significant acknowledgments included the Corporate Debtor's admission of debt in proceedings before the Hon'ble High Court at Patna and subsequent communications requesting extensions for payment under the OTS agreements. The Tribunal concluded that these acknowledgments effectively extended the limitation period.4. Validity of One-Time Settlement (OTS) Agreements:The Tribunal analyzed the OTS agreements and their impact on the limitation period. It was noted that the Corporate Debtor had agreed to an OTS amount of Rs. 250 Lakh, which was acknowledged in various court orders and communications. Despite multiple extensions and partial payments, the Corporate Debtor failed to fulfill its commitments under the OTS agreements. The Tribunal held that the continuous negotiations and partial payments under the OTS agreements constituted fresh acknowledgments of debt, thereby extending the limitation period.Judgment:The Tribunal admitted the application for initiating CIRP against the Corporate Debtor, holding that the petition was well within the limitation period due to continuous acknowledgments of debt by the Corporate Debtor. The Tribunal ordered a moratorium under Section 14 of the IBC and appointed an Interim Resolution Professional (IRP) to carry out the CIRP. The Financial Creditor was directed to deposit a sum of Rs. 3,00,000/- with the IRP to meet the expenses arising out of issuing public notice and inviting claims. The Tribunal also directed the Corporate Debtor to provide all necessary documents and information to the IRP within one week from the date of receipt of the order, failing which coercive steps would follow.The order was pronounced on 21st September 2022, and the case was scheduled to come up on 5th December 2022 for filing the periodical report.