2018 (2) TMI 1837 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - outstanding debt - HELD THAT - This petition insofar the first petitioner is concerned it cannot be admitted but coming to the case of petitioners No. 2 and 3 they have got every right to trigger corporate insolvency resolution process because financial debt is due to them and there is occurrence of default. Moreover the pendency of Company Petition filed by petitioners against the respondent company is not a ground to take a different view in this matter. The points that would come up for consideration is altogether different qua the rights of shareholders whereas in this petition the Adjudicating Authority has to see whether there is existence of financial debt and occurrence of default. Since these two things are satisfied this petition in respect of petitioners No. 2 and 3 deserves to be admitted and it is accordingly admitted.

Summary

Issues Involved:
1. Authorization to file the petition.
2. Limitation period for the claim.
3. Nature of the debt (financial debt vs. quasi-capital).
4. Default in payment and necessity of banker's permission.
5. Competence of the proposed Interim Resolution Professional (IRP).
6. Estoppel due to guarantee agreements.

Detailed Analysis:

1. Authorization to File the Petition:
The petitioners filed under Section 7 of The Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor. The respondent objected, arguing that petitioner No. 1 lacked proper authorization to file on behalf of petitioners No. 2 and 3. However, the tribunal found that separate consent and nomination letters were issued by petitioners No. 2 and 3 authorizing petitioner No. 1, thus validating the authorization. The tribunal referenced the judgment in Palogix Infrastructure Pvt. Ltd. vs. ICICI Bank Ltd., which clarified that a Power of Attorney Holder is not competent to file an application unless there is general authorization, which was present in this case.

2. Limitation Period for the Claim:
The respondent contended that the claim was barred by limitation. However, the tribunal noted that the annual report for the financial year 2015-16 acknowledged the amounts due, negating the limitation argument. Therefore, the tribunal did not find it necessary to debate the applicability of limitation to the proceedings under the Code.

3. Nature of the Debt (Financial Debt vs. Quasi-Capital):
The respondent argued that the amounts were quasi-capital contributions by shareholders and not financial debt. The tribunal examined the ledger accounts and found that interest was paid on the amounts due to the petitioners until 2013, indicating the nature of the debt as financial. The annual report for 2015-16 also acknowledged the amounts as due, supporting the petitioners' claim that the debt was financial rather than quasi-capital.

4. Default in Payment and Necessity of Banker's Permission:
The respondent claimed no default, citing a sanction letter requiring banker's permission for repayment. The tribunal dismissed this argument, noting that the sanction letter came into existence in 2016, whereas the amounts were lent in 2006-07. The petitioners were not parties to the sanction letter, and the tribunal found that the respondent's failure to repay the debt despite the demand notice constituted a default.

5. Competence of the Proposed Interim Resolution Professional (IRP):
The respondent questioned the competence of the proposed IRP. The tribunal found no merit in this objection, noting that such a plea was premature and unsupported by material evidence.

6. Estoppel Due to Guarantee Agreements:
The respondent argued that petitioner No. 1, being a director and having executed guarantee agreements, was estopped from initiating insolvency proceedings. The tribunal acknowledged this estoppel for petitioner No. 1 but clarified that petitioners No. 2 and 3, who were not parties to the guarantee agreements, were not estopped. Therefore, the petition was admitted for petitioners No. 2 and 3.

Conclusion:
The tribunal admitted the petition for petitioners No. 2 and 3, appointing Mr. Umesh Harjivandas Ved as the Interim Resolution Professional. A moratorium was ordered under Section 13(1)(a) of the Code, prohibiting the institution or continuation of suits, transferring assets, and other specified actions against the corporate debtor. The application was disposed of without any order as to costs, and copies of the order were directed to be communicated to the relevant parties.