2019 (7) TMI 1508 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of Corporate Insolvency Resolution Process (CIRP) - Corporate Debtor - default of debt or not - HELD THAT - The Petitioner is an Assignee of debt of the original lender, UCO Bank that has assigned its debt to the Petitioner vide Deed of Assignment dated 8.7.2014. The Corporate Debtor entered into the Master Restructuring Agreement dated 31.3.2012 for an amount of ₹20.26 crores owed to the Assignor. The Corporate Debtor entered into the Addendum to Master Restructuring Agreement dated 22.6.2012for an amount of ₹5.49 crores owed to the Assignor - The existence of debt is further established by various instruments for the creation of security interest for the loans availed by the Corporate Debtor such as the Additional and Third Supplement Memorandum of Entry dated 22.6.2012 and the Extension of Charge of Hypothecation dated 22.6.2012 that are annexed to the Petition. Further, the Petitioner has also annexed the Pledge of Shares Agreement dated 22.6.2012 created in favour of the Financial Creditors of the Corporate Debtor. It is an admitted fact that the Petitioner has initiated proceedings before the Ld. DRT in the year 2014 and the same has still pending adjudication. The date of default, as stated by the Petitioner in Form 1, is 31.3.2013, i.e. the date of classification of account of the Corporate Debtor as NPA. The Corporate Debtor has also acknowledged this date as the date of default. Therefore, it cannot be disputed that the proceedings before the Ld. DRT for the impugned debt was filed within the limitation period. Thus, the debt and default of more than one Lakh Rupees by the Corporate Debtor is established. Petition admitted - moratorium declared.

Summary

Issues:
1. Initiation of Corporate Insolvency Resolution Process under Section 7 of Insolvency and Bankruptcy Code, 2016.
2. Assignment of debt by original lender to the Petitioner.
3. Existence of debt, default, and security interest.
4. Barred by Limitation defense raised by the Corporate Debtor.
5. Appointment of Interim Resolution Professional and declaration of moratorium under Section 14 of I&B Code.

Analysis:
1. The Company Petition was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by the Petitioner, a Financial Creditor, seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. The Petition was based on the debt assigned by the original lender, UCO Bank, to the Petitioner through a Deed of Assignment.

2. The Petitioner established the existence of debt through various instruments and agreements, including the Master Restructuring Agreement and security creation documents. The Corporate Debtor's default was evidenced by the CIBIL report, UCO Bank's entries, and the Corporate Debtor's acknowledgment of the debt through settlement offers.

3. The Corporate Debtor raised a defense of being time-barred due to the Limitation Act, claiming the Petition was filed after five years from the date of default. However, the Tribunal found that the debt was within the limitation period as proceedings were initiated before the Debt Recovery Tribunal, and the claim was not time-barred.

4. In light of the established debt and default of more than one Lakh Rupees by the Corporate Debtor, the Tribunal admitted the Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Petitioner's proposal for an Interim Resolution Professional was accepted, and a moratorium under Section 14 of the I&B Code was declared.

5. The Tribunal issued consequential directions under the moratorium, including prohibiting suits against the Corporate Debtor, restricting asset disposal, and ensuring the supply of essential goods or services. The appointment of the Interim Resolution Professional was confirmed, and the moratorium's effect was specified until the resolution process's completion or liquidation approval. Compliance communication was directed to all relevant parties promptly.