2023 (9) TMI 84 - AT - Insolvency and Bankruptcy

Admission of Section 7 applications upheld by Tribunal, emphasizing debt recognition in insolvency

The appeals challenging the admission of Section 7 applications against Corporate Debtors were dismissed by the Appellate Tribunal. The issues of debt, ... CIRP - NCLT admitted the application - whether the CIRP proceedings were fraudulently and maliciously initiated SBI declared the credit amount as NPA - Corporate Debtor failed to make repayment of its dues - assignment of debt - Twice Restructuring of the facilities granted by the Financial Creditor - time limitation - HELD THAT:- The Corporate Debtor having committed default, initiation of Section 7 proceeding by Assignee of the State Bank of India cannot be said to be malicious or fraudulent. The State Bank of India has assigned its debt to the Edelweiss Asset Reconstruction Company Ltd on 19.03.2014 and assignee on the strength of assignment has initiated the proceeding under Section 7. The Adjudicating Authority in its order dated 25.04.2023 has also repelled the contention of the Appellant that Financial Creditor has played fraud and the Petitioner is acting malafide in filing the petition. Thus, submission of the Appellant that Financial Creditor is acting malafide in filing the petition has been expressly rejected by the Adjudicating Authority, hence, the submission of the Appellant that said submission was not considered, cannot be accepted - There being debt and default on the part of the Corporate Debtors in these two Appeals, which is not in question, there are no error in the orders of the Adjudicating Authority admitting Section 7 applications. Appeal dismissed. Issues involved:The judgment involves the challenge of orders admitting Section 7 applications by two appellants, Perfect Nivesh Infra Private Limited and Ms. Chetana Shah, Suspended Director of the Corporate Debtor, against Edelweiss Asset Reconstruction Company Ltd. The issues include debt and default on the part of the Corporate Debtor, allegations of fraudulent initiation of proceedings, and the role of the Financial Creditor in the restructuring packages.Company Appeal (AT) (Ins.) No. 1031 of 2023:The appeal challenges the admission of the Section 7 application by Edelweiss Asset Reconstruction Company Ltd. against Perfect Engine Components Private Limited. The State Bank of India declared the creditor facilities as Non-Performing Assets, leading to debt assignment to the Respondent. Despite restructuring attempts, the debt was acknowledged by the Corporate Debtor, leading to the admission of the Section 7 application. The appeal raised issues of default, limitation, and the alleged malafide initiation of proceedings, which were rejected by the Adjudicating Authority and the Appellate Tribunal.Company Appeal (AT) (Ins.) No. 1055 of 2023:This appeal challenges the admission of the Section 7 application against Perfect Engineering Products Ltd. by Edelweiss Asset Reconstruction Company Ltd. Similar to the previous case, debt and default were established, leading to the admission of the application. The appeal raised common grounds with the previous appeal, including allegations of fraudulent initiation of proceedings and the role of the Financial Creditor in the restructuring packages. The Adjudicating Authority rejected claims of malafide intent by the Financial Creditor, upholding the admission of the Section 7 application.Key Points:- The judgment addresses challenges to the admission of Section 7 applications by the appellants against the Corporate Debtors.- Issues of debt, default, restructuring attempts, and malafide initiation of proceedings were raised and considered.- The Adjudicating Authority and the Appellate Tribunal upheld the admission of the applications based on established debt and default, rejecting claims of malafide intent by the Financial Creditor.- The judgment emphasizes the importance of acknowledging liabilities and the legal implications of debt restructuring in insolvency proceedings.- The Hon'ble Supreme Court's decisions on related matters were cited to support the findings of the Adjudicating Authority and the Appellate Tribunal.