Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + AT Insolvency and Bankruptcy - 2021 (12) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (12) TMI 244 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Time limitation - Evidence of existence of debt - HELD THAT - In the instant case, the Appellant had confirmed the default and the same is undisputed. Indisputably, to secure the repayment of ₹ 31,75,00,000/- invested by the 2nd and 3rd Respondents, the Corporate Debtor had created numerous securities to and in favour of 2nd and 3rd Respondents like that of promissory notes, purchase option agreement, mortgage of freehold lands, mortgage of residential flats on an exclusive charge basis, which was contractually financed by corporate guarantee and first personal guarantees from it promoters. Time frame for admission - HELD THAT - Before an admission of an application filed under Section 7 of the I B Code, by a financial creditor , an Adjudicating Authority as per Section 7(4) of the Code is to find out the existence of the default within 14 days of receipt of the application, as mentioned in Section 7(4). On being satisfied that such a default took place, then, an Adjudicating Authority may admit such application, subject to rectification of defect, which the proviso in Section 7(5) of the Code enjoins that it must be done within 7 days of receipt of such notice from the Adjudicating Authority by the Applicant - As per Section 7(6) of the Code, the CIRP starts from the date of admission of the application. The Adjudicating Authority as per Section 7(7) is to communicate the order either or accepting or rejecting the application of the financial creditor or the Corporate Debtor within 7 days of such admission or rejection. Debt and default or not - HELD THAT - Ordinarily, an Adjudicating Authority is not required to go into the claim or counter claim made by the parties except to ascertain whether or not the record is complete and whether or not there is a debt and default committed by the Corporate Debtor . Always a Corporate Debtor has the option to point out that a default had not occurred in the sense that debt including a disputed claim is not due - it is open to the Corporate Debtor or its Directors to mention that/point out that debt is not payable by the Corporate Debtor either in Law or on facts of a given case. A debt may not be due if it is not payable either on facts of a given case or in Law. Evidence of existence of debt - HELD THAT - When there is any change in the Directors or ownership , the Power of Attorney , Authorisation letter need not be executed once again and that the subsisting authorisation is good enough in Law, all the more when the said authorisation was not revoked. Also that, in any event, no prejudice is caused to the Corporate Debtor in regard to the aspect of name change of the 2nd and 3rd Respondents. Further that, the aspect of name change will not affect the default committed by the Corporate Debtor especially when the Corporate Debtor admittedly had defaulted in meeting its obligations to the 2nd and 3rd Respondents as a result of which the CIRP was initiated by the 2nd and 3rd Respondents against the Corporate Debtor by filing the Section 7 application under I B Code before the Adjudicating Authority - It cannot be gainsaid that the Debenture Holders even in the absence of Debenture Trustees is entitled to file an Application under the I B Code seeking necessary relief. In short, the right of the 2nd and 3rd Respondent is very much saved in the Debenture Trust Deed - this Tribunal holds that they do have a valid and legal right to file the Section 7 Application under the I B Code, 2016. This Tribunal considering the facts and circumstances of the case comes to a consequent conclusion that the existence of financial debt and the default of financial debt were established on the part of the Financial Creditors /Applicant and debt in question is payable not only in Law and also in fact - this Tribunal unhesitatingly holds that the impugned order passed by the Adjudicating Authority dated 12.8.2021 (National Company Law Tribunal, Division Bench II, Chennai) in IBA/149/2020 in admitting the Application (Filed under Section 7 of the I B Code) by the Financial Creditors /Applicants is free from any legal infirmities. Appeal dismissed.
Issues Involved:
1. Opportunity to file additional written submissions. 2. Scope of Corporate Insolvency Resolution Process (CIRP) for specific projects. 3. Adjudicating Authority’s permission for amending Section 7 application. 4. Authority and locus standi of applicants to file Section 7 application. 5. Adherence to principles of natural justice. 6. Validity of claims and defaults by the Corporate Debtor. 7. Rights of debenture holders versus debenture trustees in filing CIRP applications. Issue-wise Detailed Analysis: 1. Opportunity to File Additional Written Submissions: The Appellant argued that the Adjudicating Authority passed the impugned order dated 12.08.2021 without providing an opportunity to file additional written submissions, countermanding its own order dated 29.07.2021. The Appellant contended that this violated the principles of natural justice. However, the Tribunal noted that the Corporate Debtor had already filed written submissions on 08.12.2020 and that the additional submissions did not contain substantial new grounds. 2. Scope of CIRP for Specific Projects: The Appellant contended that CIRP should be confined to specific projects funded by the 2nd and 3rd Respondents, namely GVSPL Raksha and GVSPL Green Park, as per the Appellate Tribunal’s order on 04.02.2020 in the Flat Buyers Association Winter Hills-77 Gurgaon case. The Tribunal held that the said order was case-specific and based on a settlement, thus not applicable to the present case. The Tribunal emphasized that CIRP is for the company as a whole, not for individual projects. 3. Adjudicating Authority’s Permission for Amending Section 7 Application: The Appellant argued that the Adjudicating Authority allowed the amendment of the Section 7 application after 485 days, which was in breach of Section 7 of the I&B Code. The Tribunal noted that the time limit for ascertaining default and rectifying defects is directory, not mandatory, as per the Supreme Court’s decision in Surendra Trading Co V. Juggilal Kamlapat Jute Mills Co Ltd. 4. Authority and Locus Standi of Applicants to File Section 7 Application: The Appellant contended that only the Debenture Trustee had the authority to file the Section 7 application, not the 2nd and 3rd Respondents. The Tribunal rejected this argument, stating that the Debenture Holders, being financial creditors, have the right to file the application under the I&B Code. The Tribunal emphasized that 100% of the Debenture Holders had filed the application, and their rights were not restricted by the Debenture Trust Deed. 5. Adherence to Principles of Natural Justice: The Appellant claimed that the principles of natural justice were violated as the Corporate Debtor was not given an opportunity to file additional written submissions. The Tribunal found that the Corporate Debtor had already filed written submissions and that the additional submissions did not introduce any substantial new grounds. Therefore, there was no violation of natural justice. 6. Validity of Claims and Defaults by the Corporate Debtor: The Tribunal confirmed the existence of financial debt and default by the Corporate Debtor. It noted that the Corporate Debtor had created various securities in favor of the 2nd and 3rd Respondents to secure the repayment of the debt. The Tribunal held that the debt was undisputed and payable both in law and in fact. 7. Rights of Debenture Holders versus Debenture Trustees in Filing CIRP Applications: The Tribunal held that Debenture Holders have the right to file a CIRP application without the Debenture Trustee. The Debenture Trust Deed did not restrict the rights of the Debenture Holders to act independently. The Tribunal emphasized that the 2nd and 3rd Respondents, being 100% Debenture Holders, had a valid and legal right to file the Section 7 application. Disposition: The Tribunal dismissed the Company Appeal (AT)(CH)(Ins) No.217/2021, finding no merit in the Appellant's arguments. The impugned order dated 12.08.2021 by the Adjudicating Authority was upheld as free from legal infirmities. The appeal was dismissed with no costs, and I.A. No. 437 of 2021 was closed.
|