Financial debt over Rs. 1 crore with interest established through ledger accounts triggers CIRP admission under Section 7 IBC The NCLAT upheld the NCLT's decision to admit the corporate debtor into CIRP under Section 7 of IBC, 2016. The tribunal found that financial debt ...
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Financial debt over Rs. 1 crore with interest established through ledger accounts triggers CIRP admission under Section 7 IBC
The NCLAT upheld the NCLT's decision to admit the corporate debtor into CIRP under Section 7 of IBC, 2016. The tribunal found that financial debt exceeding Rs. 1 crore, including interest, was established through ledger accounts and demand letters. The debt was acknowledged by the corporate debtor's director in financial years 2016-17, 2017-18, and 2018-19, with the last acknowledgment dated 01.04.2019. Despite the three-year limitation period expiring on 31.03.2022, the petition filed on 30.05.2022 was within limitation after excluding the COVID-19 period (15.03.2020 to 28.02.2022) as per SC directions in Suo Moto Writ Petition No. 3 of 2020. The appeal was dismissed as devoid of merit.
Issues: Admission of Corporate Debtor into Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016). Validity of demand for interest and repayment of principal amount by the Financial Creditor. Existence of debt, default, and eligibility for admission into CIRP. Defense raised regarding the limitation period for filing the application under Section 7 of IBC, 2016.
Analysis: The judgment pertains to an appeal filed by the Suspended Director of a company against an order of the National Company Law Tribunal admitting the company into Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Financial Creditor, a Non-Banking Financial Company, disbursed a loan of Rs. 7 crores to the Corporate Debtor, which was partially repaid. The dispute arose regarding the repayment of interest and the demand for the outstanding amount by the Financial Creditor.
The Appellant contended that there was no formal loan agreement, no agreed repayment date, and no demand for the principal amount, making the demand for interest illegal. The Corporate Debtor argued that the TDS deduction was at the request of the Financial Creditor to reconcile accounts. However, the Financial Creditor presented evidence of the loan transaction through ledger accounts and confirmed interest payments by the Corporate Debtor.
The Tribunal noted that the Financial Creditor had established the existence of debt, default, and eligibility for admission into CIRP under Section 7 of IBC, 2016. The debt of over Rs. 1 crore was due, demanded, and remained unpaid, meeting the requirements for initiating CIRP. The Tribunal also addressed the defense of limitation raised by the Appellant, ruling that the application was filed within the limitation period after excluding the period specified by the Hon'ble Supreme Court.
Ultimately, the Tribunal upheld the NCLT's decision to admit the Corporate Debtor into CIRP, finding no grounds to interfere with the order. The appeal was dismissed as lacking merit, and related interim applications were closed, with no costs awarded.
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