2019 (6) TMI 1394 - Tri - Insolvency and Bankruptcy

Maintainability of application - Initiation of Corporate Insolvency Resolution Process - default in repayment of including interest and other charges by Corporate debtor - time limitation - Petitioner has submitted that the period from 07.05.2008 till date is to be excluded, in accordance with section 15(1) of Limitation Act, 1963, for calculation of limitation on account of stay operating on the order dated 07.05.2008, the recovery pursuant to the said recovery certificates has come to a standstill. HELD THAT - It is settled the position of law that this Tribunal as Adjudicating Authority does not have to determine the quantum of debt at the stage of admission of the petition but only determine that the amount of debt and default is more than the stipulated threshold of ₹1,00,000/-. The Corporate Debtor has sent a letter dated 07.02.2017 offering the Petitioner an amount of ₹5,00,00,000/- as a full and final settlement of its entire due. However, the Petitioner-Bank has refused to the settlement proposal of the Corporate Debtor. This establishes the debt and default very well over ₹1,00,000/-. Concerning the argument of the Corporate Debtor that the debt is time-barred, the Petitioner has sought exclusion of time under section 15 of the Limitation Act, 1963. We are of the view that the contention of the Petitioner is correct as there was stay over the execution of recovery certificates and due to the stay orders, the recovery certificates could not be executed, therefore the period during which the execution proceedings were stayed needs to be excluded for counting period of limitation. The period from 07.05.2008 till 21.01.2019 is to be excluded as the order dated 07.05.2008 whereby SRO directed the Corporate Debtor to deposit 50% of the decretal amount was stayed by the DJR vide order dated 28.05.2009 in Revision Application No. 231 of 2008 and subsequently vide order dated 30.11.2018 the said Revision Application No. 231 of 2008 has been sent back to the DJR for re-adjudication. As per submissions of the Petitioner, vide order dated 21.01.2019 the DJR has confirmed the action taken under notice dated 07.05.2008. In the present petition, the debt and default are established. The Corporate Debtor could not show that either no debt of more than ₹1,00,000/- is due, payable and in default - The petition is well within limitation. The Application under sub-section (2) of Section 7 of I B Code, 2016 is complete. The existing financial debt of more than rupees one lakh against the corporate debtor and its default is also proved. Accordingly, the petition filed under section 7 of the Insolvency and Bankruptcy Code for initiation of corporate insolvency resolution process against the corporate debtor deserves to be admitted. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Default in repayment of loan.
2. Execution of recovery certificates.
3. Limitation period for initiating Corporate Insolvency Resolution Process (CIRP).
4. Application of principles of res judicata.
5. Appropriation of recovered amounts.
6. Admissibility of the petition under the Insolvency & Bankruptcy Code, 2016 (I&B Code).

Issue-Wise Detailed Analysis:

1. Default in repayment of loan:
The petition was filed by The Greater Bombay Co-operative Bank Limited under section 7 of the Insolvency & Bankruptcy Code, 2016, against Penguin Umbrella Works Private Limited for default in repayment of ?9,11,08,439.37. The Corporate Debtor had entered into a Cash Credit facility agreement on 03.04.2000 and a loan agreement on 27.04.2001, both secured by hypothecation of stock, book debt, and mortgage of immovable property.

2. Execution of recovery certificates:
The Petitioner obtained two recovery certificates dated 07.12.2004 for amounts of ?48,08,145/- and ?2,40,66,865.37/-. The Special Recovery and Sales Officer executed and recovered properties of the Respondent Company, amounting to ?30,48,944/- as on 30.03.2005. Various legal proceedings ensued, including a stay on execution proceedings and subsequent orders from the Bombay High Court and Divisional Joint Registrar, which affected the execution process.

3. Limitation period for initiating CIRP:
The Corporate Debtor argued that the petition was barred by limitation, citing the date of NPA (01.01.2002) and the date of Recovery Certificates (07.12.2004) as the cause of action. The Petitioner countered by seeking exclusion of time under section 15 of the Limitation Act, 1963, due to the stay on execution proceedings. The Tribunal agreed with the Petitioner, excluding the period from 07.05.2008 to 21.01.2019 from the limitation calculation, making the petition within the limitation period.

4. Application of principles of res judicata:
The Corporate Debtor contended that the petition was barred by res judicata as the same issue had been adjudicated by the Maharashtra Co-operative Court. The Tribunal dismissed this argument, clarifying that the present proceedings were for the resolution of insolvency, not for recovery or execution of the decree.

5. Appropriation of recovered amounts:
The Corporate Debtor claimed that the Petitioner did not appropriately adjust the amounts recovered from the sale of properties towards the principal amount. The Tribunal noted that the recovery certificates crystallized the debt, and the Petitioner was not seeking enforcement of these certificates but resolution of insolvency.

6. Admissibility of the petition under the I&B Code:
The Tribunal confirmed the existence of financial debt and default above the threshold of ?1,00,000/-. The debt and default were established, and the petition was deemed complete under sub-section (2) of Section 7 of the I&B Code. The Tribunal admitted the petition, declared a moratorium under section 14 of the I&B Code, and appointed an Interim Resolution Professional to carry out the functions as specified under the Code.

Order:
The Tribunal admitted the petition under Section 7 of the I&B Code, 2016, and declared a moratorium with several prohibitions, including the institution or continuation of suits against the corporate debtor, transferring or disposing of assets, and recovery of property by owners or lessors. The Tribunal appointed Mr. Vijay Pitamber Lulla as the Interim Resolution Professional and directed immediate communication of the order to all relevant parties.