https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=769491 https://www.taxtmi.com/caselaws?id=769491 Admission of Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) - application was barred by limitation or not - default date and the date of filing - Petition lacked threshold support or not - fraudulent claims and material suppression. Whether the appeal is time barred or not? - HELD THAT:- The limitation period under the Limitation Act, 1963, is governed by Section 22, which provides that in the case of a continuing breach, limitation runs afresh with each successive instance of default. The Corporate Debtor's failure to hand over possession of the flats and its continuing default in refunding amounts to the allottees constitute a continuous cause of action. The directions issued by UP RERA from time to time, including the refund order dated 13.10.2020, its amendment on 18.06.2022, and the project registration cancellation on 24.12.2022, reaffirm the subsistence of debt and the ongoing breach by the Corporate Debtor. Furthermore, the acknowledgement of debt in the Corporate Debtor's balance sheet on 30.06.2022 extends the limitation period under Section 18 of the Limitation Act, 1963. It is to be noted that an acknowledgement of liability within the limitation period gives rise to a fresh period of limitation. Therefore, the present petition, filed on 09.01.2024, is well within time - the Appellant's contention that the Company Petition is barred by limitation is misconceived. The present Application which was filed on 19.01.2024 is found to have been filed within the limitation period as per Section 18 of the Limitation Act, 1961 and there are no infirmity in the orders of the AA on this count. Threshold required under Section 7(1) of IBC - HELD THAT:- It is noted that whether they have obtained recovery certificates or not, the Respondents - Allottees remain Financial Creditors under Section 5(8)(f) of the Code, as they have not received possession of the allotted flats, and their deposited amounts have not been refunded in full. The Corporate Debtor's claim that certain Applicants have settled their dues is also unsupported, as their outstanding amounts continue to reflect in the Corporate Debtor's financial statements. Therefore, for the purpose of determining the threshold under the second proviso to Section 7(1) of the Code, Answering Respondent, including those holding recovery certificates, will be considered Financial Creditors. Whether the Company Petition under Section 7 of the Code has been initiated fraudulently and with malicious intent? - HELD THAT:- The Adjudicating Authority has held that the Corporate Debtor failed to produce any documentary evidence to substantiate its claim that the present proceedings were initiated with fraudulent or malicious intent. The mere fact that some applicants may have obtained recovery certificates does not preclude them from initiating proceedings under the Code, as long as the fundamental criteria of 'debt' and 'default' are satisfied, which has been established in this case. This Appellate Tribunal in Monotrone Leasing Pvt. Ltd. v. PM Cold Storage Private Ltd., [2020 (8) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], had held that penal action under Section 65 of the Code can only be taken where there is substantial evidence proving that the insolvency resolution process has been initiated fraudulently or for an ulterior motive. The proceedings under the Code are summary in nature, and the burden of proving fraudulent intent lies upon the party alleging it. In the present case, the Appellant has failed to produce any cogent evidence to support its allegations. The mere assertion that the applicants are engaging in forum shopping or that some allotments are disputed does not meet the rigorous standard required to invoke Section 65 of the Code. Moreover, even if certain allottees are excluded, the number of remaining applicants still satisfies the statutory threshold, rendering the present application maintainable. In view of the above, the allegation of fraudulent and malicious intent is completely baseless and has been rightly rejected by the Adjudicating Authority. We don't find any infirmity in the Impugned Order on this count. The burden of proving fraudulent intent lies with the Appellant and mere assertions by the Appellant cannot be used to invoke penal action under Section 65 of the IBC. There are no material evidence on record to suggest any malicious and fraudulent intent on the part of the Applicants - Homebuyers - In the present case, the total number of units in the project is 247, and the Answering Respondent collectively hold 34 allotted units, thereby meeting the statutory threshold. The Appellant's objection regarding the eligibility of certain allottees is without merit as the Answering Respondent satisfy the threshold requirement under Section 7(1) of the Code. Conclusion - i) The petition is not barred by limitation due to continuing default and acknowledgment of debt. ii) The Respondents satisfies the statutory threshold to initiate CIRP. iii) No fraud or malicious intent is established to invoke Section 65 penalties. iv) The Corporate Debtor is liable for pre-existing debts despite conversion. v) The Adjudicating Authority did not err in admitting the petition and initiating CIRP. Appeal dismissed. Case-Laws IBC Wed, 23 Apr 2025 00:00:00 +0530