2019 (2) TMI 1686 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process (CIRP) - Financial creditor - default in repayment of loan - Section 7 of the Insolvency and Bankruptcy Code - Time limitation - HELD THAT - Corporate Debtor s foremost contention, that the documents to prove that the Financial Creditor is acting in its capacity as a trustee of the Phoenix Trust have not been placed on record, is rejected as the Assignment Agreement itself is evident of this fact and the same has not been challenged by the Corporate Debtor. Hence, no further proof is required to be submitted in this regard. Also, as per section 5(7) of IBC, Financial Creditor means any person to whom a financial debt is owed and includes a person to whom such a debt is legally assigned or transferred. The Assignment Agreement dated 29.06.2015 legally assigns the impugned debt to Phoenix ARC Pvt. Ltd. as trustee of Phoenix Trust. Therefore, Phoenix ARC is a Financial Creditor in the meaning of section 5(7) and hence this contention of the Corporate Debtor is unsustainable. The Petition is not barred by limitation as the given petition is to enforce the payment of money secured by a mortgage of immovable property. Hence, as per Article 62 of the Limitation Act, 1963, the limitation period is twelve years from the date when the money sued for becomes due. Even if the limitation is to be taken three years from the date when the cause of action arose, then also the Corporate Debtor s Balance Sheet as on 31.03.2017 acknowledge the amount payable to the Financial Creditor. Hence, in view of Section 18 of the Limitation act, 1963, the limitation stands extended. Hon ble Supreme Court in the matter of Innoventive Industries Limited V. ICICI Bank Anr. 2017 (9) TMI 58 - SUPREME COURT , wherein inter alia it was held that the provisions of Section 7 become applicable as soon as a financial debt is established and there is an existence of default. The Hon ble court has expressed that the moment the Adjudicating Authority is satisfied that a default in repayment of debt had occurred, the process of insolvency is to be triggered, unless the application is incomplete. The nature of Debt is a Financial Debt as defined under section 5 (8) of the Code. It has also been established that admittedly there is a Default as defined under section 3 (12) of the Code on the part of the Debtor - Petition admitted.

Summary

Issues Involved:

1. Maintainability of the petition.
2. Authorization of the Financial Creditor.
3. Technical objections to the petition.
4. Limitation period for the debt.
5. Discrepancy in the amount claimed.
6. Allegation of forum shopping.
7. Existence of debt and default.

Issue-wise Detailed Analysis:

1. Maintainability of the Petition:
The Corporate Debtor challenged the maintainability of the petition on the grounds that the Financial Creditor, acting as Trustee of the Phoenix Trust, did not produce any documents or resolutions to assert its authority. The Tribunal rejected this contention, stating that the Assignment Agreement itself was evidence of the Financial Creditor's capacity as a trustee, and no further proof was required.

2. Authorization of the Financial Creditor:
The Corporate Debtor argued that the Financial Creditor was not authorized to file the petition due to the absence of proper documentation and a defective resolution. The Tribunal found that the Assignment Agreement dated 29.06.2015 legally assigned the debt to Phoenix ARC Pvt. Ltd., making it a Financial Creditor under section 5(7) of the Insolvency and Bankruptcy Code (IBC). The objections regarding the Board resolution and affidavit were dismissed as clichéd and irrelevant.

3. Technical Objections to the Petition:
The Corporate Debtor raised several technical objections, including the lack of an affidavit in Form No. NCLT 6 and defects in the Board resolution. The Tribunal dismissed these objections, stating that the petition was complete in all respects and that the affidavit and Board resolution were valid and legal.

4. Limitation Period for the Debt:
The Corporate Debtor contended that the debt was barred by limitation. The Tribunal held that the petition was not barred by limitation, citing Article 62 of the Limitation Act, 1963, which provides a twelve-year limitation period for enforcing payment of money secured by a mortgage of immovable property. Additionally, the Balance Sheet of the Corporate Debtor as on 31.03.2017 acknowledged the debt, thereby extending the limitation period under Section 18 of the Limitation Act, 1963.

5. Discrepancy in the Amount Claimed:
The Corporate Debtor disputed the amount claimed by the Financial Creditor, arguing that it was inconsistent with the sanction letters and the Recall Letter dated 09.03.2015. The Tribunal found that the amount claimed corroborated with the Statement of Accounts and that any discrepancy in the amount should be addressed by the Resolution Professional (RP) or Interim Resolution Professional (IRP). The Tribunal emphasized that its role was to ascertain the existence of a default, not to determine the exact amount.

6. Allegation of Forum Shopping:
The Corporate Debtor alleged that the Financial Creditor was guilty of forum shopping due to pending proceedings before the Debt Recovery Tribunal (DRT), Nagpur. The Tribunal rejected this contention, stating that the pendency of DRT proceedings did not preclude the filing of the present petition under Section 238 of the IBC, which has an overriding effect over other acts.

7. Existence of Debt and Default:
The Tribunal concluded that the Financial Creditor had established the existence of a financial debt and a default on the part of the Corporate Debtor. The Tribunal cited the Supreme Court judgment in Innoventive Industries Limited V. ICICI Bank & Anr., which held that the provisions of Section 7 of the IBC become applicable as soon as a financial debt is established and there is an existence of default.

Conclusion:
The Tribunal admitted the petition, appointed Mr. Hasti Mal Kachhara as the Interim Resolution Professional, and declared a moratorium as prescribed under Section 14 of the IBC. The commencement of the Corporate Insolvency Resolution Process was effective from the date of the order.