2019 (3) TMI 1634 - Tri - Companies Law

Initiation of Corporate Insolvency Resolution Process - Corporate Debtor failed to pay the outstanding amount - existence of debt and default - HELD THAT - In the instant case, the Respondent has admittedly borrowed money in question against the payment of interest from the Petitioner and thus the outstanding amount is to be called financial debt and this debt is owed to Petitioner (OBC) and thus it is to be called a Financial Creditor - a Creditor includes a Decree holder and default non- payment in whole or any part or installment of the amount of debt due and payable and not yet paid. The Petitioner being Financial Creditor, has also obtained a decree from DRT - Therefore, the Petitioner being the financial institution is undoubtedly a Financial Creditor and the contention of the Corporate Debtor contra is not at all tenable and it is hereby rejected. Time Limitation - HELD THAT - Admittedly, the Corporate Debtor has not paid the outstanding amount till date. The instant Company Petition is filed on 12.12.2018. Moreover, the loan in question granted by the Bank is a continue cause of action till loan is repaid to the Bank. As per definition of debt, it means a liability or obligation in whole or in part of the Claim - It is not in dispute that Provisions of the Limitation Act, 1963 is applicable to the provisions of the Code - the instant Company petition is within limitation. Admissibility of petition - HELD THAT - There is no solution to the issue and Respondent has not come forward to pay even part amount and thus three is no other alternative for the Tribunal except to consider the question of admission. The Respondent committed default not only in respect of instant petitioner but also to the State Bank of India apart from other banks as per the Debt Recovery Tribunal Certificate - the Corporate Debtor is prima facie become insolvent and thus it is a fit case to admit. Since the instant Company petition IS filed under Section 7 0 Code, the Adjudicating Authority has to examine, whether Company Petition is filed in accordance with the provisions oj Section 7 of the Code or not. It is relevant to refer law on the points to be considered while considering a petition/ application filed under provisions of Section 7 of Code - HELD THAT - The Adjudicating Authority/ Tribunal has to examine the instant case with regard to debt and default, whether Application/ petition is complete/ incomplete, such default is supported by evidence; named qualified Interim Resolution Professional - the instant Company petition is filed in accordance with law. The debt and default in question has occurred in the instant case, and thus it is a fit case for admission to initiate CIRP in respect of Corporate Debtor.

Summary

Issues Involved:

1. Maintainability of the petition filed by Oriental Bank of Commerce (OBC) under Section 7 of the IBC, 2016.
2. Discrepancy in the outstanding amount claimed by the Financial Creditor.
3. Status and validity of the Recovery Certificate issued by the Debt Recovery Tribunal (DRT).
4. Status of the Financial Creditor as per the definition under the IBC Code.
5. Applicability of the Law of Limitation to the claims made by the Financial Creditor.
6. Involvement and claims of other consortium banks, particularly State Bank of India (SBI).

Detailed Analysis:

1. Maintainability of the Petition:

The Tribunal examined the maintainability of the petition filed solely by Oriental Bank of Commerce (OBC) under Section 7 of the IBC, 2016. It was argued that only the lead bank (SBI) could take enforcement actions. However, the Tribunal clarified that Section 7 permits a financial creditor to file an application either singly or jointly. Since OBC is a financial creditor and the Corporate Debtor committed default, the petition is maintainable. The Tribunal concluded that the petition by OBC is valid and can proceed independently of other consortium banks.

2. Discrepancy in the Outstanding Amount:

The Corporate Debtor contended discrepancies in the outstanding amount claimed by OBC. The Tribunal noted that the Corporate Debtor initially availed a loan of ?380 Crores from the consortium banks, including ?38 Crores from OBC. The Debt Recovery Tribunal (DRT) issued a recovery certificate for ?340.55 Crores, allowing all consortium banks to recover their respective dues jointly and severally. Thus, the outstanding amount claimed by OBC is provisionally correct, subject to further verification by the Interim Resolution Professional (IRP).

3. Status and Validity of the Recovery Certificate:

The Corporate Debtor argued that the recovery certificate issued by the DRT does not exist due to ongoing disputes and modifications. However, the Tribunal found that the recovery certificate issued on 23rd March 2016 by the DRT is valid and enforceable. The Corporate Debtor’s failure to pay the outstanding amount as per the recovery certificate justifies the initiation of the Corporate Insolvency Resolution Process (CIRP).

4. Status of the Financial Creditor:

The Tribunal examined the definition of a Financial Creditor under Section 5(7) and Financial Debt under Section 5(8) of the IBC Code. It was established that OBC, having extended a loan to the Corporate Debtor, qualifies as a Financial Creditor. The outstanding amount owed to OBC constitutes a financial debt. Therefore, OBC’s status as a Financial Creditor is affirmed, and the contention of the Corporate Debtor is rejected.

5. Applicability of the Law of Limitation:

The Tribunal addressed the applicability of the Law of Limitation. It was noted that the DRT’s decree and the subsequent recovery certificate are within the limitation period. The petition filed on 12th December 2018 is within the permissible time frame. The Tribunal confirmed that the provisions of the Limitation Act, 1963, apply to the IBC Code, and the petition is not time-barred.

6. Involvement and Claims of Other Consortium Banks:

State Bank of India (SBI) filed an application to join as a petitioner/financial creditor. The Tribunal clarified that while the petition by OBC is maintainable independently, SBI can file its claims before the IRP during the CIRP process. The Tribunal granted liberty to SBI to file its claim before the IRP, who is directed to consider it in accordance with the law.

Conclusion:

The Tribunal admitted the petition filed by OBC, initiating the CIRP against the Corporate Debtor. Shri Valayudham Jayavel was appointed as the Interim Resolution Professional (IRP). A moratorium was declared, prohibiting suits, transferring assets, and recovery actions against the Corporate Debtor. The IRP was directed to file reports periodically and adhere to the time schedule under the IBC Code. The application by SBI was disposed of with liberty to file claims before the IRP. The case is posted for the IRP’s report on 30th April 2019.