2024 (12) TMI 954 - AT - IBC

NCLAT rules decree holder qualifies as Financial Creditor under IBC when debt arises from financial transactions

Mr. Rakesh Kumar Jain Versus M/s ADTV Communications Private Limited (Formerly Known as M/s AEZ Infratech Private Limited)

NCLAT Principal Bench allowed the appeal, setting aside NCLT's order dated 24.04.2023. The tribunal held that a decree holder qualifies as a Financial ... Petition filed by the Appellant is barred by limitation or not - Appellant as a decree holder, fall within the definition of a 'Financial Creditor' or not. Whether the Appellant, as a Decree Holder, qualifies as a 'Financial Creditor' under the IBC? - HELD THAT:- The Appellant gets support from the judgment of Hon’ble Supreme Court in Laxmi Pat Surana vs Union of India [2021 (3) TMI 1179 - SUPREME COURT] wherein it was held that Section 18 of the Limitation Act gets attracted the moment acknowledgement in writing signed by the parties against whom such right to initiate resolution process under Section 7 of IBC ensures. Basis the definition of the Creditor as in the Code and also the case laws as cited above, we find that the Appellant’s status as a Decree Holder does not preclude him from being recognised as a Financial Creditor. Also, the Settlement Agreement dated 11.09.2014 clearly recognised the Appellant’s debt arising out of a financial transaction. The Settlement Agreement recorded the Appellant’s financial claim, and the decree passed by the Hon’ble Delhi High Court formalised the Respondent’s obligation to pay this amount. Therefore, the decree does not alter the character of the underlying financial debt. Whether the Petition filed by the Appellant is barred by limitation? - HELD THAT:- In the facts of the case, it is found that even though the cause of action for the Appellant arose when the cheque issued by the Respondent was dishonoured on 07.04.2016, yet under Section 18 of the Limitation Act, 1963, a fresh period of limitation begins from the date of acknowledgment of the liability. In the facts of the case the limitations start running from the date when the payments are not being made as per the settlement. The default occurred on 07.04.2016 when the cheque was dishonoured. The Execution Petition was filed by the Appellant on 20.09.2016 and as noted earlier the Respondent had on various hearings before Hon’ble High Court of Delhi, acknowledged the debt as per the settlement. The Respondent on 04.09.2018 and 17.09.2018 had before the Hon’ble High Court of Delhi acknowledged the debt admitted and submissions were made for clearing the same within six months. Therefore, the cause of action effectively starts after six months or Order dated 17.09.2018 i.e. on 16.03.2019. And the Appellant had filed the Section 7 Petition on 11.10.2019 under Section 7 of the IBC. The acknowledgments by the Respondent on 23.08.2018, 04.09.2018, and 17.09.2018, as recorded by the Hon’ble High Court, extended the limitation period under Section 18 of the Limitation Act, 1963 - it can be concluded that the Petition filed on 15.10.2019 was within the limitation period. The contention of the Respondent that the Petition has been filed with a malicious intent and is covered by International Asset Reconstructions Co. Pvt Ltd [2019 (12) TMI 1583 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] is not borne out by the facts of the case as there are no malicious intent of the Appellant. Therefore, the Adjudicating Authority was incorrect in dismissing the Petition under Section 7 of the IBC on the ground that it is barred by limitation. Thus, it is evident that the Appellant qualifies as a Financial Creditor, and the Petition under Section 7 of the IBC is within the period of limitation. The NCLT’s Order dated 24.04.2023 is thus erroneous and is liable to be set aside - appeal allowed. Issues Involved:1. Whether the Petition filed by the Appellant is barred by limitation.2. Whether the Appellant, as a Decree Holder, qualifies as a 'Financial Creditor' under the Insolvency and Bankruptcy Code (IBC).Issue-wise Detailed Analysis:1. Limitation Period:The central question here was whether the Petition filed by the Appellant was time-barred. According to the Appellant, the cause of action arose when the cheque issued by the Respondent was dishonoured on 07.04.2016. The Appellant argued that the limitation period was extended due to acknowledgments made by the Respondent on various dates, including 23.08.2018, 04.09.2018, and 17.09.2018, as recorded by the Hon'ble Delhi High Court. These acknowledgments, as per Section 18 of the Limitation Act, 1963, extended the limitation period, making the Petition filed on 15.10.2019 within the permissible timeframe. The Tribunal accepted this argument, noting that the Respondent had acknowledged the debt multiple times, thus extending the limitation period.2. Status as a Financial Creditor:The Appellant contended that as a Decree Holder, they should be considered a 'Financial Creditor' under the IBC. The Tribunal referred to the judgment in Dena Bank vs. C. Shivakumar Reddy & Anr., which clarified that a Decree Holder could be classified as a Financial Creditor if the decree is based on a financial debt. The Settlement Agreement dated 11.09.2014, which formed the basis of the decree, was recognized as a financial transaction. The Tribunal emphasized that the decree did not change the nature of the underlying financial debt. Therefore, the Appellant, as a Decree Holder, was indeed a Financial Creditor under Sections 5(7) and 5(8) of the IBC.Conclusion:The Tribunal concluded that the Appellant qualifies as a Financial Creditor and that the Petition under Section 7 of the IBC was filed within the limitation period. Consequently, the NCLT's Order dated 24.04.2023 was found to be erroneous and was set aside.Order:The Appeal was allowed, and the Impugned Order was set aside. The Application filed by the Appellant under Section 7 of the IBC was admitted, and the Corporate Insolvency Resolution Process (CIRP) against the Respondent was initiated. The Adjudicating Authority was directed to appoint an Interim Resolution Professional (IRP) and take necessary steps as per the IBC within 15 days of the presentation of the order. No order as to costs was made.